Attache's Chinese Corn and Wheat Crop Pegs Below USDA

February 14, 2013 03:40 AM
 

The U.S. ag attache in China has left its estimate of the country's 2012-13 wheat crop at 108 MMT due to head blight, which may have infected as much as 20% of the crop. But it says wheat imports are expected at 2.5 MMT, which is 400,000 MT less than the previous year due to more competitive domestic wheat prices. USDA currently pegs the Chinese wheat crop at 120.6 MMT.

The attache states: "From August 2012 to January 2013, wheat prices have increased from RMB 2,169 per ton to RMB 2,360 per ton, a 9% rise. Post (attache) believes this is a strong indication that wheat production and total available supplies are lower than Chinese official production estimates. Because central government wheat auctions reportedly have sold a large portion of old crop wheat reserves, purchases of the MY 2012-13 wheat crop should comprise a significantly larger proportion of the state reserve in the coming years, some of which may still be infected with head blight. Although some Post contacts believe poor quality Fusarium infected wheat could be treated to reduce vomitoxin levels, they maintain that the wheat will also likely still need to be blended with higher quality, disease-free wheat to potentially create a commercially safe and viable product (although this may largely depend on vomitoxin levels). This would require not only a strong crop for MY 2013-14, but also a disease-free crop. If MY 2013-14 production is less than expected or suffers from a similar disease outbreak, depending on how much of the MY 2012-13 wheat crop may be infected with head blight and comprise current reserve levels, there is a possibility that China may need to further increase imports in order to meet domestic demand."

The attache estimates China's corn crop at 200 MMT, which is 4.2% higher than the previous year due to above-average yields in the northeast and northern China plain. "According to agricultural sources, yields in some areas were affected by factors such as army worm outbreaks, a typhoon and drought. In the last few years, relatively high and rising corn prices indicate that domestic supplies are tight, and may not be offsetting increasing demand," says the attache. USDA currently pegs the crop at 208 MMT.

Regarding corn demand, the attache says, "If U.S. corn prices are more competitive in the coming months, some feed mills believe that U.S. Corn imports would rise in the second half of CY 2013. In early January, CY 2013 quotas reportedly have already been allocated to end-users. However, since the fall 2012 there have been no new U.S. Corn imports contracts due to uncompetitive prices."

Additionally, the attache says according to trade sources, Chinese end-users are reluctant to purchase Argentine corn due to potential issues with customs on genetically engineered varieties that may not yet be approved by Chinese authorities. Other buyers are reportedly researching the quality of Ukrainian corn, and no shipments have yet occurred.


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