China: Feed mills chase low priced ingredients as reshaping formulations becomes easier
Brazilian corn is now available and priced competitively with domestic corn, said the authors of the USDA FAS publication. South American corn is also relatively low price compared to the US equivalent.
In addition, Chinese feed mills have exhibited increased flexibility in grain substitution in their feed formulas in the past few years, making procurement even more price-driven today, commented the team.
Brazil is projected to have 40-50 MMT corn export capacity in MY2022/23, they noted. China agreed to temporarily waive a key clause in the phytosanitary protocol re-signed with Brazil in May 2022, in part, to reduce dependence on the US, but also to replace supplies cut off from Ukraine owing to the Russian invasion, and the volatility surrounding the Black Sea Grain Initiative, they added.
Moreover, in October 2022, China approved over 130 Brazilian facilities for export.
“Industry sources reported close to 2 MMT of Brazilian corn was planned to sail to China from November 4, 2022. According to industry contacts, over 900,000 MT was loaded by mid-December and was en route with additional shipments expected in the first few months of 2023.”
Meanwhile, domestic corn production estimates are revised up slightly, according to the publication. China’s National Bureau of Statistics data indicates a better harvest in the North China Plain (NCP), which more than offset smaller yields in the northeast.
“Corn production in MY2022/23 is adjusted to 277.2 MMT, up 1.7% or 4.6 MMT from last year owing to higher yields on policy-driven lower planting acreage. Production loss from the water logging in portions of the northeast was offset by the bumper harvest in the NCP region, particularly in Henan and Shandong provinces. It is worth noting that the official government estimates astonished industry contacts and analysts which estimate production closer to 267.5 MMT or 272 MMT."
Sorghum, barley trends
Sorghum imports to China are forecast down significantly in MY2022/23 with a smaller US crop and high prices.
With diversified import sources and relatively good prices, there are still chances China will import barley for feed in MY2022/23, reads the report.
“In early December, China reportedly bought a few boats of new crop French barley for January 2023 delivery at US$393 (RMB 2,750) per MT. The Australian government is reportedly seeking negotiation with China to reopen barley trade with requests to PRC authorities to revoke their AD/CVD duties [antidumping and countervailing duties] on Australian barley. Russian barley could be another option with a cost and freight (CNF) quote at U.S.$394 (RMB 2,761) per MT in late November, however logistics challenges remain.”