Amount of China’s stockpiled corn in dispute

The U.S. Department of Agriculture thinks the country has 7.8 billion bushels of the crop, but analysts aren't convinced. | Reuters/Thomas Peter photo

Analysts think China’s mountain of corn may be more like a molehill.

The United States Department of Agriculture estimates the country is sitting on a stockpile of 198 million tonnes, or 7.8 billion bushels, of the crop.

“There is no way they have a 7.8 billion bushel surplus,” said Todd Hultman, lead analyst with DTN.

He said it simply doesn’t make sense that China is going to import one billion bushels of corn in 2020-21 if its own stockpile was that plentiful.

It also doesn’t add up that corn prices on China’s Dalian Commodity Exchange have been astronomical all year long, trading at around US$11 per bu. as of May 19.

Other organizations are starting to drastically cut their China stocks estimates.

In February, the Food and Agriculture Organization of the United Nations made a massive reduction to its number.

Its new estimate is 139 million tonnes or 5.5 billion bushels, a 28 percent drop from its December number.

Hultman has no idea if that is an accurate assessment or how much of that estimated stockpile is considered to be even feed worthy.

The anonymous author of the Dim Sums blog also seems to think something is amiss in China.

“Maybe China’s frantic grain imports over the past year are part of a campaign to refill grain reserves that were faked, looted or rotten,” stated the author in a recent blog.

China’s Food and Strategic Commodity Reserve Administration recently issued a grain management document that scolded local governments for not giving grain storage enough political attention and for misreporting grain quality and quantity.

The blog author wonders if the 100 million tonnes of government corn auctions in 2018 and the 55 million tonnes that “mysteriously sold out week after week” last year were “phony transactions to take nonexistent grain off the books.”

Hultman said China’s bloated inventory numbers kept a lid on corn and other grain prices for years until the country’s surprise buying spree in 2020 sparked a bull-run in corn, soybeans and other commodities.

“It would have been nice to know that they didn’t actually have that big surplus,” he said.

He suspects the long-running tariff trade war between the U.S. and China was likely a contributing factor behind the country’s dwindling grain stockpiles.

“They made a point of trying to import as little as they could possibly get by with during that tough negotiating time,” said Hultman.

He places little faith in the USDA’s China stocks estimate but he does pay attention to the growing gap between the country’s corn demand and production estimates.

That gap is expected to be 26 million tonnes in 2021-22, another sign that government reserves are nowhere near as large as is being reported.

A similar story is unfolding with China’s wheat supplies.

The USDA estimates China will end 2020-21 with 145 million tonnes of wheat stocks.

But China Grain Net is reporting that less than 50 million tonnes remains to be sold after a string of government auctions last year, according to the Dim Sums blog.

Hultman said something is definitely fishy given that China is expected to import 10.5 million tonnes of wheat in 2020-21 and another 10 million tonnes in the upcoming crop year.

Much of that wheat is reportedly destined for the feed market. Why import feed wheat if it has 145 million tonnes of stocks?

“That’s hard to justify or support,” he said.

“To all of us (analysts) that just doesn’t make much sense.”

Hultman said the U.S. will not pick up much of that wheat business because it is not price competitive in that market. The lion’s share of the business will go to other exporters like Canada, the European Union and the Black Sea region.

Contact sean.pratt@producer.com

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