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Grain auctions and patterns of meat production in China show increased imports

China’s grain demand has been a focal point for agricultural markets since 2020 and suppliers continue to seek clarification, particularly on corn where global supplies are expected to tighten further and in light of recent announcements from Beijing which all indicate food security concerns. .

Forecasting China’s grain demand is a challenge due to the opacity of information on harvest conditions, production, consumption and stock levels. That’s why when China suddenly placed huge corn orders with the United States in 2020, above its annual tariff rate quota, it took the market by surprise.

But trends and patterns in grain auctions, local meat production, and corn production are all indicative of increased imports in the years to come.

Chinese imports of grains such as barley, sorghum and wheat also increased in 2020 and continue to grow in 2021.

China has faced a maize supply shortfall since at least 2016, which was addressed by auctions of huge maize reserves acquired before 2016.

China sold around 57 million tonnes of maize in its 2017 auction, over 100 million tonnes in 2018, around 22 million tonnes in 2019 and 58.05 million tonnes in 2020, according to data from the National Grain Trade Center of China.

Although not all of the maize auctioned was consumed, the size of the maize volumes purchased by traders and end users indicates the extent of the maize supply deficit in the country.

As long as the supply gap was covered by reserves and imports remained well below the annual quota, attention was limited in the Chinese corn market, but the recent surge in imports has now caught the attention of the big boys. suppliers, especially from the United States.

Besides the United States, the other major world corn exporters are Brazil, Argentina and Ukraine. But the Chinese market is currently only open to the United States and Ukraine. Thus, until imports from Brazil and Argentina are allowed, US and Ukrainian exporters will retain an advantage.

And if China’s buying continues over the next few years, world prices could be very stable or increase significantly depending on the supply situation. In general, corn prices on the CBOT in most areas from 2015 to 2020 were below the $ 4 / bushel level. But that changed with the purchase of corn in large quantities by China. Currently, the most active corn futures contract on the CBOT is $ 5.38 / bu.

Absence of corn auctions

The response to China’s appetite for grain imports could well play out in 2021. This in turn could lead us to a more reliable estimate for 2022, one caveat being the lack of large corn auctions which distort the image of demand.

But China is highly unlikely to hold a big corn auction in 2021, given that it continued to buy corn from the United States even when prices were at multi-year highs.

China has auctioned imported corn so far this year, but at much lower volumes as imports increase. China’s maize imports between January and June 2021 stood at 15.3 million tonnes, up 318.5% year-on-year.

While China has stocks as high as 198.18 million tonnes, as the US Department of Agriculture reported in its July report, the lack of grain auction announcements in 2021 is puzzling for markets because the country has relied on import auctions to fill the supply gap over the past 5 years.

“China could have such huge corn stocks [as reported by the USDA], keeping food security issues in mind during [the] pandemic or their stocks may be very low. Nonetheless, it is clear that there is a structural imbalance in the corn supply, ”said Pete Meyer, head of grain and oilseed analysis at S&P Global Platts.

China’s maize production has stagnated around 260 million tonnes over the past five years, while consumption continues to grow; Unless corn production increases to the level of 270-272 million tonnes in 2021-22, “we see a structural imbalance of 32 million tonnes of corn for China in 2021-22,” Meyer said.

In addition, recent announcements from China, such as urging livestock and poultry producers to reduce the use of soybean meal and corn by replacing them with replacement feeds, increase the area available for planting to the first time in several years and adding grain production to its macroeconomic control targets for the first time underscores the feed grain deficit.

In April, the National Steering Committee for Animal Nutrition suggested that wheat, sorghum, barley, rice, cassava may be good alternatives to maize in feeding pigs and chickens, and in the case of soy, rapeseed, cottonseed, peanut, sunflower and sesame meal.

The guidelines also recommended a mix of foods for different regions of China. For example, in northeast China, corn in pig feed can be reduced by at least 15% by replacing it with rice and rice products, while soybean meal can be reduced. be reduced by at least 10% by increasing the use of distillers’ grains with solubles, or DDGS and corn gluten meal, according to the report.

Increase in meat production

China’s total meat production has been declining since 2018, following the African swine fever outbreak, but the impact on feed grain imports has been mixed with the presence of large corn auctions confusing the picture supply and demand.

Most of China’s grain imports are used to feed its large pig population.

China’s total meat production in 2018 was 86.24 million tonnes, and the country’s total imports of three major grains – maize, barley and sorghum – were 15 million tonnes, according to data from China’s customs and statistics services.

In 2019, China’s meat production fell to 77.59 million tonnes, while imports of the three major feed grains amounted to 11.8 million tonnes; it was also the year when China struggled to replenish stocks of pigs lost to ASF.

Meanwhile, more than 100 million tonnes of corn was auctioned off by the Chinese government in 2018, up from 21.8 million tonnes in 2019.

In 2020, when China’s total meat production stood at 77.48 million tonnes, imports of corn, barley and sorghum jumped to 24.3 million tonnes. In addition, 58.05 million tonnes of maize was sold at government auctions in 2020 and auctions of wheat, which can also be used as fodder, increased to 23.23 million tonnes from just 2.67 million tonnes in 2019.

The above data indicates that the demand for feed grains in China has not been met by local production and that the government has had to tap into reserves as well as imports to close the gap between supply and demand. demand, even when meat production has fallen.

Importation and Auction of Major Feed Grains Compared to Meat Production in China

If we look at China’s meat production before 2018, the last time it was below 80 million tonnes was in 2010. The five-year average of China’s meat production before 2018 was close to 87 million tonnes. Even a conservative estimate of future meat production will be considerably higher than the levels seen in 2019 and 2020, which would also mean higher demand for feed grains.

Without the periodic grain auctions and increased production, feed grain imports in the coming years could easily reach post-2020 levels.

It should also be noted that the option of replacing corn with wheat is not always available, as wheat is generally more expensive than corn.

Replacing corn with wheat is not a straightforward process in livestock feed ingredients. Typically, ranchers do not make any major changes to the diet of livestock midway through the production cycle, as this can negatively impact the weight of the livestock at the time of slaughter, Meyer said.

Maize and Wheat Prices in China

Finally, pork production in China has dramatically altered the structure of the supply chain, with the share of industrial scale farms increasing at the expense of smaller farms. Since the proportion of corn used in feed is higher among pork producers on an industrial scale, the demand for corn could only increase from here.


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