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September 02, 2020 | FBN Insights | Kevin McNew

China Corn Shortfall

China’s building livestock herds and poultry flocks have increased need for feed grains

China Corn Shortfall 

  • China’s agriculture ministry forecasts year-end stocks of minus 16.7 million tonnes in the upcoming 2020/21 season.
  • The deficit could be as great as 30 million tonnes, according to a Reuters survey of analysts.
  • Four years ago China ended a program that paid farmers above-market prices for corn and has since produced less corn than it consumes. 
  • Once bulging stockpiles have decreased, driving up domestic corn prices.
  • Prices recently hit a five-year high, and Dalian October corn futures reached 2,322 yuan per tonne, up 13% since May.
  • China projects its 2020/21 corn crop at around 266.5 million tonnes, but will again not produce enough to meet demand.
  • It is estimated China has filled its corn import quota of 7 million tonnes.
  • Feed wheat use in the 2020/21 crop year could rise versus previous years. 

FBN’s Take On What It Means: China’s building livestock herds and poultry flocks have increased the need for feed grains. The need for imports is likely to be limited by substitution, given China's ample supplies of other grains, and feed manufacturers are already turning to cheaper, more available wheat. China also is about to harvest a large new crop, and continues to sell corn from government stockpiles, which are not depleted. But, cheap world prices and the trade deal with the US have encouraged greater purchases and USDA will likely increase its trade forecast in the next report. 

Record Soy Crush for July 

  • The NASS Fats and Oils industry crush reported for July was a new monthly record at 184.5 million bushels, up from 179.5 million last year.
  • NOPA’s share of the total crush this month, earlier reported at 172.8 million bushels, dropped to 93.7%.
  • Per day crush increased from 5.91 million bushels per day in June to 5.95 million in July.
  • Cumulative crop year crush totals 1,990 million bushels compared with 1,914 million last year.
  • With only one month left in the 2019/20 crop year, 170 million bushels need to be crushed in August to reach the USDA projection of 2,160 million.
  • Industry July meal production of 4.4 million tons was up 175,000 tons from last year, and yield increased to 47.27 lbs/bu. 
  • July oil ending stocks were 2,124 million pounds compared with 2,271 million at the end of June. 

FBN’s Take On What It Means: Even though maintenance downtimes increased during the month, larger total crush capacity still allowed for a new monthly record. A sharp pick up in bean movement was also seen, particularly in the western Corn Belt. Improving crush margins due to strong product demand and a higher board crush spread encouraged high run rates. USDA’s soy crush forecast of 2,160 million bushels is still likely too low and an adjustment higher is expected. 

 

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