Milling News
IGC PREDICTIONS RING TRUE
A
s many of the speakers predicted at the recent IGC Conference, China’s imports of corn and feed grains are set to slump after the government increased the amount auctioned from state reserves and domestic prices dropped to a decade low. China is currently the world’s second-biggest corn consumer, and its government is offering about 7.9 million metric tons of corn from its stockpiles for a third week; compared with six million tons offered in auctions held July 21 and 22 and about two million tons offered July 12-13, which included poor quality grain. This news comes as last week Chinese corn futures tumbled to a decade low amid increasing sales from state reserves. Almost 13 million tons has been sold since auctions began on May 27, according to data from the National Grain Trade Center compiled by Bloomberg. Imports may slump 69 percent in the year starting October and purchases of alternative feeds barley and sorghum will also drop, according to the China National Grain and Oils Information Center. “Imports of corn substitutes have become almost impossible,” said Feng Lichen, chief analyst at Chicorn, a private consulting firm to Bloomberg Markets. “Domestic futures prices have already fallen below prices for imported barley and sorghum.” The quantity of corn that has been earmarked for January delivery, after China’s harvest, fell to 1,438 yuan a ton on August 2nd on the Dalian Commodity Exchange, the lowest
for the most-active contract since October 2006. Futures were at 1,453 yuan on Wednesday, a 12 percent discount to the September delivery contract. The price of U.S. sorghum imported to China including taxes was at 1,689.12 yuan a ton on Tuesday. Australian barley was at 1,545.06 yuan a ton. China’s sorghum imports dropped 45 percent in June from a year earlier and barley purchases fell 51 percent, according to official customs data. Inbound corn shipments plunged 92 percent in the period, stated a Bloomberg Markets source. The Chinese government is expected to sell about 40 million tons of corn in 2016, including 20 million tons sold directly to the market earlier this year, according to Feng’s estimate. The government has about 230 million tons of reserves, data held by JCI shows; which is more than double as recent U.S. Department of Agriculture estimate. All of this comes as China is grappling with a corn glut after the government began subsidising output in 2008, acquiring grain at above-market prices to protect farm incomes. The government is set to end the stockpiling system, replacing it with other subsidies to make it more market based, and is reducing the area planted to corn for the first time in a decade. China’s 2016-17 corn harvest is still set to exceed annual consumption, CNGOIC estimates. “Enterprises are very cautious in building stocks as they expect a further drop in prices,” stated Zhang Zhixian, senior researcher at Cngrain.com, a state-affiliated researcher. “If farmers are having problems selling their harvests, local governments may have to stockpile this year.”
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22 | September 2016 - Milling and Grain
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