China's Corn Policies Distort Markets for Other Feedstuffs

China's corn stocks are forecast to account for more than a half of global stocks by the end of 2015/16, having nearly doubled in just 5 years. The build-up in stocks has been attributed to a price support policy intended to make China more self-sufficient. Each year, the government establishes minimum purchase prices to encourage corn planting. When market prices fall below the set level, the government buys corn and stores it in the reserves. China is struggling with both massive stocks and domestic prices well above world levels.

As a result of high domestic corn prices, China emerged in 2013/14 as a major importer of alternative feed ingredients such as barley, sorghum, distiller's dried grains, and cassava. Combined imports of these feedstuffs are ahead of last year's pace for the first 4 months (Oct-Jan) in 2015/16; however, barley, sorghum, and corn imports are still forecast down over 30 percent from 2014/15. Government efforts to reduce stocks by promoting domestic corn use are expected to reduce imports of corn substitutes.

OVERVIEW

World corn production for 2015/16 is marginally lower, driven mainly by a smaller South African crop. Global trade is projected up, highlighted by greater imports for South Africa and the Philippines. Exports for Brazil, Indonesia, and South Africa are boosted, more than offsetting a cut in India. The U.S. season-average farm price is unchanged.

PRICES

Since the February WASDE report, U.S. export quotes fell $13/ton to $159 due to large global supplies and strong competition. U.S. corn has dropped to a discount against all major exporters for the first time since January 2015. Both Argentine and Black Sea quotes fell this month (now $160/ton and $165/ton, respectively) based on strengthened global competition. Brazilian prices are seasonally unavailable.

TRADE CHANGES IN 2015/16

Selected Exporters

  • Brazilian corn is boosted 1.0 million tons to 37.5 million on the continued fast pace of shipments.
  • Indian corn is down 200,000 tons to 500,000 reflecting higher domestic prices and fading competitiveness in the world market.
  • Indonesian corn is raised 225,000 tons to 250,000 with larger expected shipments to the Philippines. (Imports are down 200,000 tons to 3.1 million on a larger crop.)

Selected Importers

  • Mexican corn is up 200,000 tons to 11.5 million on the fast pace of sales, particularly from the United States.
  • Philippine corn is boosted 300,000 tons to 800,000 to offset lower production. Feed use is expected to remain strong with wheat feeding reduced.
  • South African corn is raised 700,000 tons to 2.7 million on lower expected production and the intensifying pace of arrivals. (Exports are up 200,000 tons to 800,000 on higher expected demand from Southern African Customs Union (SACU) partners.)
  • Venezuelan corn is down 200,000 tons to 1.9 million on the slow pace of imports.
  • Pakistani sorghum is up 115,000 tons to 130,000 based on recent U.S. export sales. High domestic corn prices are driving sorghum use in feed rations.