TAMPA, Fla. – The U.S. Grains Council thinks China will buy a lot more corn than the United States Department of Agriculture is forecasting, leading to a further contraction of already tight stocks.
That has the potential to push corn prices higher, which would support all grain prices.
The council sees a minimum of three million tonnes of Chinese demand for U.S. corn in 2011, which it says is about double what the USDA predicts.
“But I would not be surprised to see it be as high as 7.4 million tonnes, which is the trade rated quota,” said council president Thomas Dorr.
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That is the amount of corn China can bring into the country duty-free.
China has been mum on its corn inventories but a recent statement by the president of the China Grain Reserves Corp. indicates mounting concerns about dwindling supplies.
Agrimoney.com reports that Bao Kexin is urging restrictions on exports of the grain and on its use in the ethanol industry.
“Corn shall be used mainly for animal feed and large volumes used for industry should not be allowed,” he said.
Dorr told delegates at a session on China at the 2011 Commodity Classic conference that his numbers come from trusted Chinese sources who estimate three million tonnes of U.S. corn imports in 2011, five million in 2012 and a minimum of 15 million by 2015.
Given tight U.S. supplies in 2010-11, the council has been trying to convince Chinese buyers that they need to buy corn early and regularly.
Dorr said it is unlikely China will buy much corn before the end of March but it could be in the market for a substantial amount after April 1.
“The problem is right now if we tried to tack on those kinds of numbers in our present supply and demand situation it would raise some real challenges,” he told delegates.
China has been largely self-sufficient with corn supplies. But a rapidly expanding middle class is hungry for meat and China’s estimated 650 million hogs are hungry for corn.
It is estimated that 234 million Chinese families will be added to the middle class between now and 2020.
In order to feed the bulging middle class, the country has been forced to start importing feed for livestock.
It began by importing 600,000 tonnes of U.S. distillers grain in the last half of 2009. There are no rules impeding trade of DDGs.
In 2010, China imported three million tonnes of distillers grains and 1.5 million tonnes of U.S. corn.
Dorr said the future buying potential of the country is staggering.
China imported 57 million tonnes of soybeans in 2010 and grew three million tonnes. That volume would produce 40 million tonnes of meal.
Using the formula that for every six pounds of energy you need one pound of protein to make a concentrated livestock ration, that results in an innate demand for 240 million tonnes of corn or corn equivalent. Another 60 million tonnes of the crop is being ground for food.
That’s a total of 300 million tonnes of corn or corn equivalent demand in a country that produced about 172 million tonnes of the crop last year.
“We can do the math and we realize that there is a market here for a lot of corn,” said Dorr.
He is “90 percent sure” the crop has been removed from the list of grains for which China has a policy of being 95 percent self-sufficient.
Mark Petry, former agricultural attaché at the U.S. embassy in Beijing, said those kinds of calculations make the Chinese nervous.
“They’re very insecure about the changes taking place the last 10 years in agriculture and the fact that they have to import so much,” he said.
Chinese politicians are rethinking their food security policy. Petry said that presents an opportunity for U.S. exporters to pitch the idea that U.S. growers are part of China’s food security solution.
“That is a difficult lesson for them to internalize because unfortunately in many cases, they think that American farmers are somehow enemies.”
