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Analysis: China’s farmers ditch other crops for corn thanks to huge profit gain By Reuters

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Analysis: China’s farmers ditch other crops for corn thanks to huge profit gain By Reuters
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© Reuters. FILE PHOTO: A farmer harvests corn in a field on the outskirts of Jiayuguan, Gansu Province, China, September 28, 2020. REUTERS / Carlos García Rawlins

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By Hallie Gu and Gavin Maguire

BEIJING / SINGAPORE (Reuters) – Chinese farmers have dramatically increased corn plantings this year to charge record prices driven by demand, a trend likely to dampen the country’s recent rampant appetite for imports heading into 2022.

The expansion, which comes primarily at the expense of soybeans and other crops, including sorghum and edible beans, would boost China’s corn production in 2021/22 by at least 6%, according to market participants.

That will likely alleviate a repeat of last year when strong demand for feed from the pig sector pushed China’s use of corn beyond local production and sparked a 26 million ton import wave that made the world’s largest grain producer. in the main buyer of corn.

“I’m going to grow corn all over my land this year. No more other things,” said Li, a farmer in the northern province of Hebei who last year grew millet on about a third of the 300 mu (20 hectares) of land. he commands.

“Corn prices went up so much last year. Profits would be good,” said Li, who declined to give his full name.

It is difficult to obtain consistent and accurate data on China’s crop footprints, especially after the inexplicable suspension of Beijing-based agricultural information provider Cofeed. The private consultancy, considered by many in the market to be the most comprehensive provider of information on grains and oilseeds in China, stopped updating the data in April.

With Cofeed offline and other consultancies reluctant to diverge their opinions on crops too far from government estimates that are often considered conservative, market participants have become increasingly reliant on anecdotal evidence for closer-term readings. about surface changes.

JCI has forecast a 6.2% increase, about 14.9 million tons, in corn production in 2021/22 to 253.9 million tons, the highest in four years. Based on surveys of farmers and other industry players such as seed sellers, JCI estimates that the corn acreage will expand by 3.9% to 42.0 million hectares.

“Corn prices are high and profits are good. People still think there will be a shortage of corn (this year) while livestock is recovering,” said Rosa Wang, an analyst at JCI.

“Farmers are very enthusiastic about growing corn. The government also encourages more planting of corn.”

While JCI projections are on par with and slightly above the 3.96% and 4.9% increases in acreage and production, respectively, from the China National Grain and Oils Information Center, a group of experts from the government, other forecasters, and farmers themselves say they are too conservative.

Huatai Futures, a leading futures broker that conducts farmer planting surveys in China, forecasts a 14.5% increase in production and a 6.2% increase in acreage.

In the northeastern province of Heilongjiang, the country’s top corn and soybean producer, farmers have planted 27% more corn than a year ago, said Zhang Zhidong, an analyst at Huatai Futures.

JCI estimates that corn production in Heilongjiang will skyrocket 20% from the previous year to 36.65 million tonnes in 2021/22.

IMPORT DROP

China has long restricted corn imports through a low-tariff quota system, historically totaling around 7 million tonnes annually.

However, the increase in reference prices for Dalian corn last year exceeded international prices so much that importers could still bring in international corn, pay the full duty and make a profit.

Key exporters that have benefited from China’s corn import spree include the United States and Ukraine.

Amid fears of food inflation, Beijing has supported the corn planting campaign in key grain centers, reversing a multi-year political stance of encouraging producers to diversify from corn after officials ended. to an expensive corn storage scheme and sold huge stocks.

The resulting increase in corn acreage “should weigh on prices and reduce China’s need to import somewhat,” said Darin Friedrichs, senior analyst at commodities brokerage StoneX, who expects corn imports by 2021 / 22 drop to 15 million tons.

The US Department of Agriculture’s China attaché expects 2020/21 imports to fall to 20 million tonnes, compared with the official USDA estimate of 26 million tonnes, due to a drop in the competitiveness of the international price of corn and higher local production.

According to JCI, corn imports could reach 27 million tons, down from its estimate of 30 million tons last season.

SOY TRAY

The earnings from corn come mainly at the expense of soybeans, which could have the opposite effect of increasing imports of the legume, which comes mainly from the United States and Brazil.

The US Department of Agriculture projects China’s soybean imports at 103 million tons in the 2021/22 season, up from 100 million tons in 2020/21.

“We have increased corn acreage by 25%, which means a 25% drop in soybean acreage,” said farmer Liu, who jointly manages around 1,700 hectares in Heihe, a traditional stronghold of soy. in Heilongjiang.

Another farmer, Han, who manages more than 750 mu of land in neighboring Inner Mongolia, has replaced all of the soybean acreage, about 80% of the land he manages, with corn this year, betting on “rising corn prices. “.

Back in Hebei, Mr. Li is relieved to be able to grow corn again after the soybean and millet growing seasons in recent years.

“Anyway, we don’t have a lot of experience growing other crops,” he said. “We always grew corn after harvesting wheat. For years and generations, it has mostly been like this.”

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