By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

ARLINGTON, Va., Feb. 25 – “We have tight supplies of corn and soybeans . . . there is little supply cushion for corn and beans in the event of adverse weather.” That's part of the warning Michael Jewison, a Foreign Agricultural Service ag economist, delivered at USDA's Agricultural Outlook Forum Friday.

The rest of Jewison's warning was that much of what lies ahead for corn and soybeans could depend on China which he called “the wild card.” Jewison, who speaks fluent Mandarin, expects continued surging demand for feed ingredients, particularly in China. He said more production will be needed to meet rising global consumption. And in the case of soybeans, he said meeting that increased demand will primarily be up to the U.S., Argentina and Brazil. He noted that for the most part, South America will respond by increasing acreage while the U.S. will increase yields. He said area and yields in both the U.S. and South America “will have to increase to keep up with China.”

With a bullish outlook for both corn and soybeans, Jewison said “net returns for corn and soybeans are expected to be historically high, looking at $600 an acre net for corn, $425 an acre for soybeans.” He explained “this supports greater area for corn but also maintained area for soybeans . . . and also supports a 10 million acre increase in total planted area.”

Jewison said “in just a decade, we've gone from abundant supplies and low prices to tight supplies and high prices.” He said a major driver is China because “When you look at soybean import demand, they have accounted for all of the growth in global soybean import demand.” He pointed out that “in just a few years, China's imports of feeding grains have doubled” because “Chinese hog producers are making more money on hog prices relative to corn prices” – and because the Chinese government shifted policy in favor of “more large-scale hog production,” triggering more consumption of grain and protein meal. Additionally, he pointed out, income growth in China has led to greater pork consumption.

Jewison concluded that after China's surprise purchase of one million tons of U.S. corn last year, with corn prices higher now, “the economics don't support imports at this point.” Then he pointed to “the political sensitivity of imports” and said the Chinese “could have a policy change that could make them an importer at any moment. But that is very difficult to predict.”

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