FAO Makes Historical 15% Upward Revision of China Corn Stocks
In its latest world supply and inventory estimates report, the UN Food and Agriculture Organization (FAO) made a historical upward adjustment to China’s corn stocks for the years between 2004 and 2009, resulting in a 15% increase to its estimate for the country’s corn inventory for 2014/15 to 95.4 million tons.
This significant adjustment follows closely upon the heels of the U.S. Department of Agriculture (USDA) cutting its medium-term prediction for Chinese corn imports in January, and reinforces the belief that estimates for the country’s expected demand for corn imports may have been overestimated.
In 2014, the USDA predicted that China was on pace to become the largest grain importing country in the world, however, evidence has surfaced that led industry analysts to reconsider. Upon review, the FAO states it has reduced its estimates of corn used for feed in China between 2004 and 2009, meaning that the extra supply would have been shifted to inventory. As a result, the organization has revised its estimate for Chinese corn stocks from 82.7 million tons to 95.4 million tons – significantly higher than the USDA estimate of 79.2 million tons, and the International Grains Council estimate of 85.7 million tons.
The FAO revision in historical stock numbers aligns with the fact that there were bumper crops in 2012 and 2013, a reduction in consumption and falling global grain prices that made cheap imports available. At the same time, Beijing’s farm policies called for higher domestic support prices for corn than what was being paid on the international market, causing an increase in China’s domestic production.
Abdolreza Abbassian, chief economist with the FAO, states that based on what some Chinese exporters are reporting, even the latest estimate of 95.4 million tons of corn in China’s reserves might be too low. This will come as a blow to major exporting countries and traders who have been expecting China’s demand for corn imports to increase in the coming years to supply its livestock industry with feed as demand for meat increases.