Rain, Acreage Boost China Corn Outlook
(Reuters) - China's corn output this year could rebound from last year's low after rains assuaged hot and dry conditions and many farmers, fresh from harvesting winter wheat, planted more corn rather than soy or cotton, analysts said on Monday.
A better harvest this year could mean China, the world's second-largest consumer, may not need to source more corn from global markets after buying more than 1 million tonnes from the United States since late April, the largest volume in 15 years.
China's need to import U.S. corn, after a drought-hit harvest last year, has been a major support for Chicago corn prices, which have risen 5.3 percent in the April-June quarter compared with a 2.7 percent gain in the previous three months.
"There was pretty much enough rainfall last week which eased the hot conditions (in the north)," said Li Qiang, president of an influential private consulting firm, Shanghai JC Intelligence Co. Ltd. "Output this year will be much better than last year on the condition that the northeast escapes early frost."
Li last week visited two major northern corn areas, Shandong and Hebei, and said a delay in corn planting due to a late winter wheat harvest had only a minor impact and farmers there had increased corn acreage.
"The corn acreage was bigger this year. Many farmers have shifted to corn from cotton and soy. Cotton acreage has been replaced largely with corn," said Li. Farmers have switched on expectations of earning better prices than by sowing crops such as soy.
Li also expects corn output to be higher this year in the northeast -- Heilongjiang, Jilin, Liaoning and Inner Mongolia -- provided there is no early frost during the October harvest. Early frost is common in the northeast in September and October, but not in the northern provinces.
Figures from the agriculture department of Heilongjiang, the largest corn-supplying region, showed farmers shifting to corn or rice had increased the province's corn acreage by 9.8 percent and cut its soy acreage by about 11 percent this year.
IMPORTS IN THE BALANCE
Corn prices have risen about 10 percent in major growing areas this year, but the gains were slowed by the improved weather, imports from the U.S., a release of Chinese government corn stocks and measures to crack down on hoarding.
Physical prices at Dalian, China's commodities hub in the northeast, have slipped about 3 percent from a peak in June, and were trading slightly higher on Monday.
"The recent recovery of pork prices could drive up corn demand. If prices rise too much before the domestic harvest, the government authority may allow COFCO to import more," said one industry source who closely monitors China's corn imports.
Unlike soy crushers, who imported a record volume of 6.2 million tonnes of soy last month, feed mills rely much more on the physical market and very few are willing to hedge on the futures market for corn.
In addition, feed mills in inland provinces, far from costal areas, spurn imports because of the cost of transportation.
"Unless there is a big price difference, they are not interested in imports even with the current price advantage," said the industry source, referring to inland feed mills.
MANAGING THE FROST RISK
The darkest cloud on the horizon for China's corn crop is the risk of an early winter frost in the northeast after a cold spring delayed corn planting there, particularly in the furthest northeast province, Heilongjiang.
"In Heilongjiang, the late planting made a lot of farmers switch from 115 day maturity corn to 100 day, which supposedly cuts about 10 percent off of yield potential," said an analyst at Fortis, who declined to be identified.
Early maturing seeds were only planted north of Harbin, capital of Heilongjiang, according to a local agricultural official. Another official said farmers would also use intensive methods and more fertilizer to quicken the harvest and lessen the risk from early frost.
JCI's Li said the early maturing acreage only accounted for about 5 percent of the local corn area and the increase in acreage could offset the reduction in yield.
An initial forecast by JCI put China's corn output this year at 149 million tonnes, about 10 million tonnes higher than its estimate of last year's output, when the most severe drought in years hit most of the northeast areas.
But the JCI estimate is much lower than the 168 million tonnes forecast by the China National Grain and Oils Information Center (CNGOIC), the official think-tank.
http://www.reuters.com/
A better harvest this year could mean China, the world's second-largest consumer, may not need to source more corn from global markets after buying more than 1 million tonnes from the United States since late April, the largest volume in 15 years.
China's need to import U.S. corn, after a drought-hit harvest last year, has been a major support for Chicago corn prices, which have risen 5.3 percent in the April-June quarter compared with a 2.7 percent gain in the previous three months.
"There was pretty much enough rainfall last week which eased the hot conditions (in the north)," said Li Qiang, president of an influential private consulting firm, Shanghai JC Intelligence Co. Ltd. "Output this year will be much better than last year on the condition that the northeast escapes early frost."
Li last week visited two major northern corn areas, Shandong and Hebei, and said a delay in corn planting due to a late winter wheat harvest had only a minor impact and farmers there had increased corn acreage.
"The corn acreage was bigger this year. Many farmers have shifted to corn from cotton and soy. Cotton acreage has been replaced largely with corn," said Li. Farmers have switched on expectations of earning better prices than by sowing crops such as soy.
Li also expects corn output to be higher this year in the northeast -- Heilongjiang, Jilin, Liaoning and Inner Mongolia -- provided there is no early frost during the October harvest. Early frost is common in the northeast in September and October, but not in the northern provinces.
Figures from the agriculture department of Heilongjiang, the largest corn-supplying region, showed farmers shifting to corn or rice had increased the province's corn acreage by 9.8 percent and cut its soy acreage by about 11 percent this year.
IMPORTS IN THE BALANCE
Corn prices have risen about 10 percent in major growing areas this year, but the gains were slowed by the improved weather, imports from the U.S., a release of Chinese government corn stocks and measures to crack down on hoarding.
Physical prices at Dalian, China's commodities hub in the northeast, have slipped about 3 percent from a peak in June, and were trading slightly higher on Monday.
"The recent recovery of pork prices could drive up corn demand. If prices rise too much before the domestic harvest, the government authority may allow COFCO to import more," said one industry source who closely monitors China's corn imports.
Unlike soy crushers, who imported a record volume of 6.2 million tonnes of soy last month, feed mills rely much more on the physical market and very few are willing to hedge on the futures market for corn.
In addition, feed mills in inland provinces, far from costal areas, spurn imports because of the cost of transportation.
"Unless there is a big price difference, they are not interested in imports even with the current price advantage," said the industry source, referring to inland feed mills.
MANAGING THE FROST RISK
The darkest cloud on the horizon for China's corn crop is the risk of an early winter frost in the northeast after a cold spring delayed corn planting there, particularly in the furthest northeast province, Heilongjiang.
"In Heilongjiang, the late planting made a lot of farmers switch from 115 day maturity corn to 100 day, which supposedly cuts about 10 percent off of yield potential," said an analyst at Fortis, who declined to be identified.
Early maturing seeds were only planted north of Harbin, capital of Heilongjiang, according to a local agricultural official. Another official said farmers would also use intensive methods and more fertilizer to quicken the harvest and lessen the risk from early frost.
JCI's Li said the early maturing acreage only accounted for about 5 percent of the local corn area and the increase in acreage could offset the reduction in yield.
An initial forecast by JCI put China's corn output this year at 149 million tonnes, about 10 million tonnes higher than its estimate of last year's output, when the most severe drought in years hit most of the northeast areas.
But the JCI estimate is much lower than the 168 million tonnes forecast by the China National Grain and Oils Information Center (CNGOIC), the official think-tank.
http://www.reuters.com/
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