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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


04 July 2013

USDA GAIN: China Grain and Feed UpdateUSDA GAIN: China Grain and Feed Update

China’s wheat production in MY13/14 is revised to 118 million tons, a two percent decrease from the previous year, due to yield losses from adverse weather. MY13/14 wheat imports are forecast at 4 million tons, an increase of 1 million tons from MY12/13 due to competitive international prices. In MY13/14, corn acreage is estimated to rise two percent from the previous year supporting a production forecast estimated at 210 million tons. Strong domestic consumption will drive MY13/14 corn imports to 5 million tons. Rice imports in MY13/14 are estimated at 3 million tons, due to its price competitiveness over domestic rice, which is supported by a government floor price.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Author Defined:

Wheat

Production

For marketing year MY13/14, wheat production is estimated at 118 million tons, down 3 million tons from the previous year, due to yield losses from adverse weather. According to Post’s field survey and confirmed by industry sources, prolonged rainy days in late May and June adversely impacted the wheat yield in major wheat production provinces such as Henan, Hubei, Anhui and Shandong. In parts of these regions, the excessive rainfall also downgraded wheat quality; as a result, there is a relatively high rate of unsound kernels, such as molded or germinated kernels, in this year’s crop, according to industry sources. For marketing year MY13/14, wheat production is estimated at 118 million tons, down 3 million tons from the previous year, due to yield losses from adverse weather. According to Post’s field survey and confirmed by industry sources, prolonged rainy days in late May and June adversely impacted the wheat yield in major wheat production provinces such as Henan, Hubei, Anhui and Shandong. In parts of these regions, the excessive rainfall also downgraded wheat quality; as a result, there is a relatively high rate of unsound kernels, such as molded or germinated kernels, in this year’s crop, according to industry sources.

A preliminary estimate by Henan state grain company showed that in the southern part of the province, approximately 10 million tons of wheat failed to meet quality standards as required for state reserves due to a relatively high rate of unsound kernels (shrunk, germinated, or mold damaged). Industry sources reported that to protect farmers’ income, the government may purchase substandard wheat at a price lower than the preset floor price. Such wheat could be temporarily stored in state silos and later sold to feed or flour mills. Similar state purchases occurred in MY09/10 when state grain reserves bought germinated wheat in Henan.

Trade

Beijing Wheat imports in MY13/14 are projected to reach 4 million tons, one million higher than the previous year, because of a lower than expected harvest. Trade sources estimate that the price for quality wheat rose in the major wheat producing provinces due to reduced yields and lower quality which may influence additional wheat imports in MY13/14.

Given the price competitiveness with local production and demand for better quality, imports are blended with local production at flour mills, particularly in the south coastal province of Guangdong. If priced competitively over corn, imported wheat is also used in the feed sector. For MY13/14, traders are reporting purchases of feed wheat from France due to its competitive price advantage over China’s domestic corn in Guangdong province. Reported prices for French wheat are more than 100RMB per ton ($15) lower than offered for domestic corn.

Corn Production

MY13/14 corn acreage is forecast to rise by two percent from the previous year as farmers favor corn planting over soybeans and tubers. Overall national corn production is forecast at 210 million tons, assuming a better than average yield in MY 13/14.

In northeast China, corn planting was delayed by nearly two weeks due to excessive soil moisture and low temperatures in the spring. In Heilongjiang, the largest soybean production province in China, soybean acreage has declined in recent years while corn acreage has grown. However, in MY13/14, due to adverse planting conditions in parts of the province, corn could not be planted in time to substitute for soybeans.

Despite this two week delay in corn planting in most parts of the Northeast, Post’s crop tour in June showed that the corn emergence in the Northeast was rated above average, due to adequate soil moisture at planting time. The current crop size, however, is rated below normal because of prolonged low temperatures in May. However, famers are expecting an above average year in 2013 based on the positive emergence rate. Heilongjiang is experiencing the best emergence rate for corn in recent years. Crop conditions in Jilin and Liaoning provinces are also rated above average. Corn remains a preferred crop in the northeast due to its higher yield and stable price compared to soybeans, mung beans, and kidney beans.

In MY13/14, however, corn production costs continue to increase. Labor costs and land rentals are expected to climb by more than 10 percent over the previous year and, costs for seed, fertilizer and other agricultural chemicals, such as pesticides and herbicides, are estimated to rise slightly from the previous year, according to Post’s field survey.

MY12/13 corn prices in the Northeast are more than 10 percent lower than last year due to bumper crops and a slowdown in industrial and feed use which affects farmers’ profit margins. To support themarket price and maintain farmers’ income, the state reserve purchased 30 million tons of corn in the Northeast as temporary reserve. This reserve will be made available for southern consumption, as needed, if market prices strengthen.

Consumption

Feed consumption growth in MY12/13 was slower than the previous year due to an avian influenza outbreak in the poultry sector and other meat safety incidents which lowered demand. A full recovery in feed use for the poultry and swine sectors is expected in MY13/14 barring no new animal disease outbreaks.

Trade

MY13/14 corn imports are estimated at 5 million tons. Given current low prices for U.S. corn, both private sector (feed mills) and the government (state reserves) are expected to purchase corn from the United States. Trade sources estimated that by end of May, China made several purchase contracts (approximately 2.5 million tons) for delivery after September 2013. Currently, the United States is almost the exclusive corn supplier to China. However, trade sources report that Chinese importers are also looking to expand suppliers, such as Argentina and Ukraine that gained market access in recent years. In MY11/12, an end user (a feed mill) experimented to import some corn (less than 50 tons) from Argentina.

China’s Administration on Quality Supervision, Inspection and Quarantine (AQSIQ) listed the table below noting all exporting countries to China. AQSIQ updates this list when market access is granted for new suppliers.

Rice

For MY13/14, forecast for rice acreage and production is unchanged from the annual report.

Consumption

For MY13/14, overall rice consumption is forecast to remain unchanged despite media reports of safety issues with heavy metal contamination in domestic rice crops. Rice is a local food, and as such, consumer preference for rice varieties (Indica or Japonica) does not change easily. However, the food safety scandal could provide a useful marketing opportunity for domestic brand names or imported rice varieties that are associated with high quality and safety.

Trade

In MY12/13 and MY13/14, rice imports are estimated at 2.8 million tons and 3.0 million tons, respectively. Rice imports from Vietnam, Pakistan and Thailand continue to be price competitive over domestic rice. According to rice mills in Hunan and Jiangxi, the major rice production region, the current import price for Indica rice is about RMB 300 per ton (or US$48 per ton) cheaper than local rice. Both the rice producer and rice mills (processing domestic rice) complain to the government about the rise in rice imports in MY12/13. Reportedly, the government has tightened controls on tariff rate quota (TRQ) allocations for rice imports in CY 2013. It was previously reported by trade contacts that, due to improper supervision, the importers used the Japonica TRQ to import Indica rice varieties. China’s total TRQ for rice is 5.2 million tons on a calendar year basis (divided equally between Indica and Japonica).

Barley: No revisions to USDA's official estimate.

Sorghum:

Production estimate is unchanged

MY13/14 sorghum imports are revised upward to a record high of 500,000 tons. According to trade sources, in the first half of CY2013, after AQSIQ clarified its policy permitting sorghum imports for feed (or food), the feed mills in southern China have contracted about 400,000 tons of U.S. sorghum for delivery in MY13/14. There is no TRQ on sorghum imports. Feed mills in China have a strong interest in purchasing sorghum from the United States or Australia; however, exportable supplies may be limited in these two countries, according to trade contacts.

July 2013

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