China is going to be in the market for U.S. grain for years to come. Following a U.S. Grains Council trade mission to China last week, Thomas Dorr, the council’s president and chief executive officer, heard from sources that the country’s corn reserves are 10 to 12 million metric tons (390 to 472 million bushels) of corn less than previously thought for the 2011/2012 crop year.
The economic growth in China, and throughout Asia, is exceeding expectations for demands on livestock, poultry and dairy supplies. As the country tries to grow its domestic production of those goods, it also is requiring more feed grains than in the past. As a result, last year China made the first significant purchase of U.S. corn since 1995, buying around 1.5 million metric tons (59 million bushels).
“After reviewing the figures with a number of sources, I believe it is possible that China will purchase another 2 to 3 million tons (79 to 118 million bushels) of corn prior to the end of the 2010/2011 crop year,” Dorr says. “Chinese buyers would ideally like 5 to 7 million tons (197 to 276 million bushels) but realize present global inventories may not accommodate this added demand.”
If the United States is to capture the long-term value of this change in the U.S./China corn trade relationship, Dorr says it’s important for both countries to develop a system that adequately signals demand. That in turn would signal U.S. producers to increase production to meet the new demand. One critical component of developing this relationship will be China’s ability to work with U.S. suppliers to provide an accurate reading of production estimates and carryover stocks.
“U.S. farmers need consistent signals, and if given the correct ones, they will step up to the task at hand. Chinese buyers and end-users need to be transparent with regard to becoming a sustainable market,” he says.
Dorr adds that it’s in the interest of Chinese and U.S. corn farmers and their customers to produce normal to above-normal trend yields, emphasizing the importance for both countries to work to foster the most efficient use of seed and production technology possible.
“It is important that Chinese buyers and U.S. producers work together to address these challenges and opportunities in the immediate term,” Dorr notes. “We need to work together to make necessary commitments to technology and infrastructure development. The Chinese can produce more corn and we can deliver more. All of this will be necessary to reward the market accordingly. The U.S./China relationship is critical and the USGC looks forward to future opportunities to solidify this relationship.”