Case Is Building for Higher Chinese Corn Imports

Posted on Wed, 09/16/2020 - 06:57

Three typhoons since August that brought high winds and heavy rains to China’s main corn producing region in the northeast have stoked speculation about the extent of crop damage. Zhang Dalong, an analyst with COFCO futures, told Reuters “We think that corn output in the northeastern region would fall 5 MMT to 10 MMT this (crop) year” relative to China’s official 2020-21 forecast of 264.71 MMT.

Chinese corn futures have climbed to record highs as images and videos of flattened corn circulated, spurring concerns about supply shortages for the world’s second-largest consumer of the grain that has reportedly depleted its stockpiles. Further, China is still working to rebuild its hog herd and has cracked down on swill use.

There is also concern about the quality of knocked down corn, with analysts fearing the loss of test weight and mold. Meng Jinhui, senior analyst with Shengda Futures, estimates corn production in China’s northeast will slide about 5 MMT. The ag consultancy Cofeed says production losses in China’s top corn producing Heilongjiang province could be up to 20%. Provincial Chinese governments are downplaying the impact. The case seems to be building for larger Chinese imports of corn.

Some of our China watchers have corn import estimates of 15 MMT to more than 20 MMT for China. If those prove correct, USDA’s 7 MMT import projection for China in both 2019-20 and 2020-21 would be one of its biggest misses and signal a reassessment of China’s future corn needs is needed.