Chinese Imports of Feedstuffs Soar

China's imports of barley, sorghum, distiller's dried grains (DDGS), and cassava soared in 2013/14 (Oct-Sep) as feed millers sought alternative ingredients. China's domestic corn prices have been elevated by producer support programs, a tariff-rate quota for corn, and uncertainties caused by its heightened enforcement of an unapproved biotech trait for corn (and DDGS).

Traditionally, barley and sorghum are the main ingredients for beer, vinegar, and distilled spirits production. Now, however, imported barley and sorghum are being incorporated into rations for the rapidly developing industrial animal feed sector. Imports of barley and sorghum are forecast to continue at elevated levels in 2014/15, making the country the world's largest sorghum importer and the second-largest barley importer.

China accounted for over 80 percent of U.S. sorghum exports in 2013/14 and accounts for nearly all of U.S. export commitments (outstanding sales and shipments) to date in 2014/15, boosting U.S. sorghum export unit values above corn. However, a recent government agreement between China and Argentina to facilitate sorghum exports could bring competition and pressure prices lower. For the next few months, the United States will remain China's dominant supplier as new-crop Australian and Argentine supplies will not be available until March.

OVERVIEW

World corn production in 2014/15 remains a record and is nearly unchanged as smaller production in the United States and China more than offsets larger crop forecasts for the European Union, Ukraine, and Mexico. Global trade is down slightly as larger domestic feed grain supplies in the EU displace more corn imports. In addition, Chinese demand for feedstuffs is being met from barley and sorghum, reducing prospects for corn (and DDGS) imports. The U.S. season-average farm price is projected higher this month.

PRICES

Since the release of the October WASDE report, U.S. corn export quotes have mostly climbed, continuing a trend that began 6 weeks ago. By early November, prices had risen $14/ton to $191/ton. U.S. export prices are underpinned by a late harvest, high barge rates and other logistical problems, and strength in the soy complex. However, price growth has been constrained by expectations for a larger U.S. crop and relatively slow export sales and shipments (exacerbated by a stronger U.S. dollar). The premium of U.S. quotes over South American has remained largely unchanged. Argentine and Brazilian quotes are now $14/ton and $6/ton below U.S., respectively. Black Sea quotes are $14/ton below U.S. and are up slightly over the last month as EU demand remains sluggish.

TRADE CHANGES IN 2014/15

Selected Exporters

• Argentine corn is cut 1.0 million tons to 12.5 million and Brazilian is down 500,000 tons to 22.0 million on lower expected global trade and greater competition from Ukraine. (Ukrainian corn is boosted 500,000 tons to 16.5 million.)

• Canadian and EU barley are up 200,000 tons each to 1.2 million and 6.7 million, respectively, on strong demand from China.

• U.S. sorghum is raised 300,000 tons to 5.6 million on continued purchases from China.

Selected Importers

• Chinese corn is cut 500,000 tons to 2.5 million as policies favor imports of other feedstuffs.

• EU corn is 1.0 million tons lower to 6.0 million on plentiful supplies of feed grains.

• Iranian corn is boosted 200,000 tons to 5.5 million on reports of continued purchases.

• Chinese barley is raised by 500,000 tons to 4.5 million on continued strong demand. (2013/14 is up 400,000 tons to 4.9 million.)

• Chinese sorghum is boosted 300,000 tons to 4.6 million because of continued purchases from the United States.

• Mexican sorghum is slashed 200,000 tons to 100,000 on a larger crop.

TRADE CHANGES IN 2013/14

Selected Exporters - based on trade data

• U.S. corn is up 200,000 tons to 50.7 million.

• Argentine corn is boosted 300,000 tons to 12.8 million.

• Paraguayan corn is raised 400,000 tons to 2.7 million.

• Ukrainian barley is up 200,000 tons to 3.7 million.

Selected Importers - based on trade data

• Indonesian corn is boosted 200,000 tons to 3.5 million.

• Mexican corn is raised 250,000 tons to 11.0 million.

• Turkish barley is cut 250,000 tons to 750,000