- DTN Headline News
China Struggles With Corn Stockpile
Tuesday, July 28, 2015 8:16AM CDT

By Lin Tan
DTN China Correspondent

BEIJING (DTN) -- China's corn reserve has reached historic levels, and the government is having a hard time selling it.

"Chinese state reserve procured 83.3 million (metric) tons of 2014/2015 corn crop, much higher than last year's 69.2 mmt," said Zhonghua Wang, a market analyst at Zhaoshang Futures in Beijing. "Government auction results in the market was poor -- not too much corn was sold so far this year. As a result, the total stockpile is close to 150 million tons now."

The Chinese state reserve performs auctions every week, but end users are not active buyers because its priced higher than imported corn. At a recent weekly auction just 126,300 metric tons, or 2.4% of the 5.315 mmt offered, sold.

Wang said the government started the auctions early this year -- the second week of April compared to late May last year -- in an attempt to sell more from the stockpile. According to the state reserve's data, the government has sold 3.4 MMT of corn since April 9.

"Compare that to its 150 MMT of total stockpile. It is nothing," Wang said.

China sets a floor purchase price policy to support its farmers, but there are rumors that China will lower the price next year for the first time in years.

"Some analysts said the price may be 200 renminbi per ton ($0.82 per bushel US) less than last year. Most of the people believe that the price will be lower, but not that much, maybe within 100 renminbi per ton ($0.41 cents per bushels US) less," Wang said.

Other analysts suggest the government will set restrictions on how much it will buy, perhaps only 40 mmt of new crop corn, less than half of what it bought in 2014-15.

The government paid the equivalent of $9.18 per bushel and is trying to sell it for $9.63 per bushel. It only costs $6.47 per bushel for imported U.S. corn.

China has imported 3.6 mmt of corn so far this year crop year and 4.5 mmt for 2014-15. Most of the corn imports have come from Ukraine.

Under China's import tariff quota system, 7.2 mmt of corn can be imported with a 1% tariff. After that, the tariff rises to 64%. There are no tariff rate quotas on sorghum, DDG or barley imports, which are expected to total 9 mmt, 6 mmt and 6 mmt respectively. Wang believes those imports substitute for 16 mmt of corn.

"The livestock feed market is not good this year, and most companies do not have large storage" facilities, said Wenge Fu, vice president Hope Group, of one of the largest feed companies in China. "We are trying to maintain two months of storage, but small companies may only have 15 days."

Wang thinks market prices may be the only tool the government can use to solve the stockpile issue. If China sets the floor price for new-crop corn lower, it could help them sell corn closer to the market price.

"Unless there is a big reduction in corn production in China and the world, the state reserve will find it difficult to sell all of the stockpile in the short run," Wang said.

(KM/SK)


blog iconDTN Blogs & Forums
DTN Market Matters Blog
Katie Micik
Markets Editor
Monday, July 27, 2015 7:01PM CDT
Tuesday, July 21, 2015 7:40PM CDT
Monday, July 20, 2015 3:45PM CDT
Technically Speaking
Darin Newsom
DTN Senior Analyst
Saturday, July 25, 2015 2:38PM CDT
Saturday, July 25, 2015 1:34PM CDT
Saturday, July 25, 2015 1:08PM CDT
Fundamentally Speaking
Joel Karlin
DTN Contributing Analyst
Thursday, July 23, 2015 3:20PM CDT
Wednesday, July 22, 2015 3:45PM CDT
Friday, July 17, 2015 12:56PM CDT
DTN Ag Policy Blog
Chris Clayton
DTN Ag Policy Editor
Monday, July 27, 2015 4:35PM CDT
Thursday, July 23, 2015 6:44PM CDT
Wednesday, July 22, 2015 7:50PM CDT
Minding Ag's Business
Marcia Taylor
DTN Executive Editor
Tuesday, July 28, 2015 9:41PM CDT
Monday, July 27, 2015 6:27PM CDT
Wednesday, July 22, 2015 3:57PM CDT
DTN Ag Weather Forum
Bryce Anderson
DTN Ag Meteorologist and DTN Analyst
Tuesday, July 28, 2015 7:42PM CDT
Thursday, July 23, 2015 6:42PM CDT
Wednesday, July 22, 2015 2:05AM CDT
DTN Production Blog
Pam Smith
Crops Technology Editor
Friday, July 24, 2015 8:10PM CDT
Monday, July 13, 2015 7:07PM CDT
Friday, June 19, 2015 7:19PM CDT
Harrington's Sort & Cull
John Harrington
DTN Livestock Analyst
Friday, July 17, 2015 7:58PM CDT
Thursday, July 2, 2015 6:04PM CDT
Friday, June 26, 2015 8:56PM CDT
South America Calling
Alastair Stewart
South America Correspondent
Monday, July 27, 2015 7:59PM CDT
Friday, July 17, 2015 4:25PM CDT
Wednesday, June 24, 2015 3:33PM CDT
An Urban’s Rural View
Urban Lehner
Editor Emeritus
Monday, July 27, 2015 9:53PM CDT
Tuesday, July 21, 2015 3:18PM CDT
Tuesday, July 14, 2015 11:25AM CDT
Machinery Chatter
Jim Patrico
Progressive Farmer Senior Editor
Tuesday, July 28, 2015 10:04PM CDT
Tuesday, July 14, 2015 10:18PM CDT
Thursday, July 9, 2015 11:25AM CDT
Canadian Markets
Cliff Jamieson
Canadian Grains Analyst
Friday, July 24, 2015 9:27PM CDT
Thursday, July 23, 2015 9:19PM CDT
Wednesday, July 22, 2015 10:00PM CDT
Editor’s Notebook
Greg D. Horstmeier
DTN Editor-in-Chief
Tuesday, July 14, 2015 7:45PM CDT
Wednesday, July 8, 2015 7:45PM CDT
Tuesday, June 30, 2015 8:29PM CDT
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN