China looks to reduce domestic corn prices to shift stock levels: report
It is believed the Chinese government could slash maize prices by around 10% in 2016-17, on top of previous cuts announced for this year, in order to try and curb imports of cheaper maize substitutes and reduce massive stocks.
It was also reported that Beijing may also offer freight subsidies to animal feed processors in south China, making transport costs from the north growing belt less expensive.
Commenting on the speculation, Anna Lockwood, analyst at AHDB Market Intelligence, said more domestic use of maize in China could impact on imports of alternative feed grains such as barley and sorghum, which could make exports of these grains from key global producers more challenging.
WASDE China outlook
The US Department of Agriculture (USDA), in its most recent world supply and demand estimates (WASDE), revised Chinese opening stocks upwards by 18.8Mt from the October forecast.
The USDA, said the analyst, did so after the demand for the grain for animal feed was lower than was previously anticipated throughout 2014-15.
Chad Hart, associate professor of economics and crop markets specialist with Iowa State University Extension said the USDA did make some fairly large adjustments for corn in China. “They reduced the amount of feed use in China and have put that into Chinese inventory, so that number is pretty large.”
However, he told FeedNavigator earlier this month that there is always some flexibility in terms of reporting around feed stock levels in China as exact inventories numbers are difficult to confirm. “These are USDA’s numbers so what do they have? We don’t really know,” he added.
Maize opening stocks for 2015-16 are now estimated to be over 100Mt and unless they begin to dwindle, global and domestic grain markets could continue to feel the pressure from heavy stocks, said Lockwood.
European winter crops
Meanwhile, Helen Plant, also an analyst with AHDB market intelligence, said winter crops across much of Europe received a boost from warmer than usual conditions from end-October to mid-November.
The latest EU MARS Crop monitoring bulletin showed average temperatures of 2 to 4°C above the long term average were recorded in northern Europe, which boosted crop emergence and development.
And Strategie Grains has forecast the EU-28 wheat area to decline 1% for harvest 2016 but still be historically high, while the barley area is seen rising 2% with the rapeseed area broadly stable.
Overall, its report noted that winter crops in the EU have got off to a generally favorable start but it also highlighted that conditions remain poor into Ukraine and Russia.