China's Impact on U.S. Grain Markets
China’s huge corn stockpile – half the world supply – is a global headache. U.S. sorghum and barley growers are likely to feel the pain along with corn farmers, as Beijing throttles down on grain imports and makes homegrown corn more price competitive.
Second to the U.S. as a corn producer, China harvested a string of bumper crops, lured by high support prices that led to dramatically larger plantings. When harvest begins this fall, Chinese bins are forecast to hold 111.5 million tonnes of corn, a 36% increase in two years.
“We expect China to slow imports of corn and corn substitutes to prevent its stockpile from growing even larger and to reduce those stocks,” says chief USDA economist Robert Johansson. Shipments to China of U.S. sorghum and barley this year are forecast at half of 2014’s tonnage. Corn shipments are projected at 3 million tonnes this marketing year, with slow growth in the future.
Overall, China will scale back on feed grain imports through the end of this decade, says USDA, which projects total grain imports of 16.4 million tonnes in 2024, a large step down from the 24.5 million tonnes of wheat, rice, and feed grains projected a year ago. Feed grains would be two thirds of the total.
To get supplies under control, China’s Agriculture Ministry aims to reduce corn plantings by 10% over the next five years, says Bryan Lohmar, the U.S. Grain Council director in China. He says China, the number three ethanol producer in the world, could tackle its notorious air pollution by converting some of its corn stocks into biofuels. To encourage corn sales, China recently cut its procurement price for 2015 corn, says USDA.
Corn is not China’s only problem grain; it has half the world’s rice stocks and one third of the wheat stocks. While Beijing is trying to unwind price imbalances for corn, “the government has yet to reduce support levels for wheat and rice,” says Johansson.