China Building Protection

Published on: 17:01PM Jan 28, 2009
China Building Protection?
Allendale is well aware of the fact how dominate China is as a holder of starch stocks when compared to total world stocks. The facts are at present China holds 35% of the world corn end stocks, 50% of the world rice stocks and 30% of the world wheat end stocks. China’s starch holdings clearly dwarf those of any other country.
            Since 2005, China has been incrementally building stocks in all three starch grains. When compared to recent lows for the three starch crop, China’s share of world stocks have risen from 28% in 2005 to 35% in 2008/09, rice from 48% to 50% and wheat from 23% to 30%.
            It should come as little surprise China had personally experienced a tragic famine from the spring of 1959 to the end of 1961 which caused death from starvation of approximately 30 million or 4.4% of its population. China’s government does not want to re-live the experience. In the event of a potential weather crisis, you must be aware of how well positioned China is and becoming less reliant upon outside sources of starch needs.
            Digging deeper into China’s hold on starch stocks, Allendale finds China’s end stocks as a percent of its domestic consumption is in fact on a notable rise, most specifically for wheat and then rice and corn.
The percent of wheat stocks vs the total annual consumption for China is at a high of 42% for 2008/09 vs just 33% in 2005/06. China does hold impressive, although less than wheat, corn and rice stocks as a percent of consumption. Projected for 2008/09 for corn is 29% vs a low of 25% as recently as 2006/07. And with regards to rice, China hold 32% of rice stocks vs consumption vs a recent low of 28% in 2005.
China is without question building independence from the world when analyzing its impressive stock build of corn, wheat and rice. Is there in fact other significant reasons other than protect food security? Why does China not have the same security for soybeans as its end stocks as a percent of annual consumption is only 9% and domestic stocks as a percent of world stocks are 8%. With China’s recent acquisition plan of domestic corn, rice and soybeans from its farmers Allendale estimates China is likely to provide incentives necessary to its farmers to be more aggressive for soybean plantings in 2009 and potentially to a lesser degree for the starches.
China’s building food security in starch stocks bears monitoring heading into spring planting season and beyond. Consider the impact such a decision could have on USA and South America soybean crops and extended network in 2009.
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