Exclude or not? Grain analyzes evolve as China increases imports

By Karen Braun

FORT COLLINS, Colo. (Reuters) – The practice of excluding China from global wheat and corn scans has grown in recent years due to rising stocks in the country. However, last year China became the top importer of corn as domestic prices soared. Is the exclusion therefore still valid?

Given that the premise of China’s separation is tied to its previously minimal participation in world trade, both calculations should probably be made, but there is still convincing evidence to maintain the separation.

China has long maintained large stocks of grains for food security, although it officially abandoned this practice for corn a few years ago. But its weight on world supply has increased, which has sometimes masked fluctuations in exportable products.

China’s import patterns have differed over the decades, but activity had recently been quiet. Just five years ago, the country was not among the top 10 importers of corn and wheat, but it rose to number one for corn last year, and that is expected to continue at least this year.

Its wheat imports were the second in the world in 2020-21 and equally large purchases in 2021-22 are expected to be enough for No.4, according to U.S. government estimates.

However, China is unique in that its imports represent an unusually small share of annual demand as no other importer produces such a massive crop. China is No. 2 for corn production and No. 1 for wheat.

Chinese corn imports this year are expected to cover 9% of needs. The same figures for the other major importers are 38% for Mexico and almost 100% for Japan and South Korea. For wheat, the percentage comparisons with others are similar to those for corn because these buyers are heavily dependent on foreign grains.

Another possible problem with accounting for Chinese and global corn supplies is that Chinese stocks have become more of a mystery in recent years, but the surge in prices does not suggest as comfortable a situation as USDA figures might suggest. for example.

However, logistical barriers are notorious in China. Since cereal and animal production areas generally do not overlap, it is sometimes more expensive to move products within the country than to import from abroad. This might offer some validity to a high stock and high import argument.

China spoke more about stocks of wheat, which is still intentionally stored and supported by prices in the country. Beijing said earlier this month it has a year and a half of wheat in reserve, although that is more generous than US estimates of six months.

USDA figures suggest China will hold a record 51% of the world’s wheat by mid-2022. Its corn share is estimated at 69%, down slightly from last year, although industry ideas are likely to vary.

China is not hiding the shortage of exportable wheat this year, as evidenced by the rise in world prices to multi-year highs, and the same is true for corn. Excluding China, global wheat ending stocks are expected to reach their eight-year low in 2021-2022, which corn reached in the previous marketing year.

(Edited by Matthew Lewis)

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