WASHINGTON, June 8, 2016 - China is looking to sell off some of its corn reserves, but an expert in the international grain trade doesn’t see the sales having much of an impact in the U.S.
According to media reports, China will sell about 2 million metric tons of corn per week between now and September, but the reasoning is still up in the air. Some say that it’s to clear out room in storage for an influx of corn from 2016 harvests around the world, but Tom Sleight, U.S. Grains Council president and CEO, tells Agri-Pulse that it might signal a slight change in the Chinese approach to corn stocks.
“How much of these supplies do they want to carry? Do they want to treat corn like they treat wheat and rice, like an essential food commodity?” Sleight said. “The feeling is that they’re not going to, that they’re going to stop carrying these heavy supplies on storage and let the market start to take over for corn.”
China has already been more vocal about another change in its approach to the world corn market when it announced in March intentions to end its corn stockpiling system. Now, the country is facing a potential 32 MMT selloff, but Sleight doesn’t see the auctions having a major impact on U.S. producers.
“China is not a significant importer of U.S. corn right now, and we’ve got other markets that are picking up the slack,” he said. “We hope the impact of this has already been worked into the market and will be fairly minimal.”
The latest USDA World Agricultural Supply and Demand Estimates (WASDE) report sheds some light on the Chinese corn market. China is projected to import 1 MMT of corn in the 2016/2017 marketing year compared to 14.5 MMT by Japan and 13.5 MMT by Mexico. By comparison, the same report suggests China will import 5 MMT of rice and 87 MMT of soybeans during the same time period.
China’s typical monthly corn demand is about 15 MMT, so selling 2 MMT per week to the market will not go unnoticed in the world market, but the projected 218 MMT of domestic production in China in 2016-2017 could soften the international blow of the auctions. That’s also on top of China’s beginning stocks, the amount of which is a state secret, but guesses range from 100-110 MMT.
Now, Sleight says, players in the international grain trade will be watching the sales to see where the grain is going, the amount that is sold, and the corn’s price and quality (some of it has been in storage since 2012). The corn auction announcement also included the sale of 200,000 metric tons of rice.
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