The Van Trump Report

Smaller China Corn Crop Forecast but US Exports Unlikely to Benefit

China is among the many countries that struggled through one bad weather hit after another this growing season. About half the country endured a record-breaking heatwave that lasted some two months while northern regions suffered nearly two months of excessive rains. Corn production was also up against  greater competition from soybeans while much of what did get planted in key growing areas struggled with serious fall armyworm infestations. All of this has led to what looks like a smaller corn crop than most have been expecting. Unfortunately, it doesn’t look like the lower production will present much opportunity for US corn exports with Brazil eligible to start shipping corn to China later this year.  

USDA’s China attache just recently estimated the 2022/23 corn crop at 270 million metric ton (MMT), which is -4 MMT less than the official USDA estimate, and -2.5 MMT lower than 21/22. Post notes that official and industry estimates range from 267.5 MMT to 275 MMT. USDA’s attache report says its less optimistic outlook is partially due to lower planting area, which fell -1%. Post equates some of the reduction to competition from soybeans which benefited from subsidies that were nine times higher than those for corn. Production is also down due to production losses due to heavy rains in Northeast China throughout June and July.

USDA’s China attache also highlighted more serious fall armyworm (FAW) occurrences in key southern growing regions. As of September 1, FAW was found in 846 counties of the 27 provinces, or about 6% of the total corn area. In total, the area affected by FAW increased by about 3 million acres, though China officials claim they have successfully limited damage from the pest to under 5% of total production the past three years.      

As for China’s corn imports in 22/23, USDA’s Post has them pegged at 18 MMT and estimates 21/22 corn imports at 22 MMT, the same as USDA’s official estimate. That’s despite the fact that feed corn and residual use is forecast +2 MMT higher than USDA’s current estimate as feed mills add more corn over wheat, which Post notes was +$44 per MT more expensive than corn. Feed mills reported using +35% more corn in feed rations during the first eight months of 2022, +4% higher than 2021.

Higher feed demand is expected to be offset by lower industrial use, however, with plants struggling to profitable amid rising corn prices. Post notesthat corn starch plants operated at just 58% of capacity in MY2021/22. Meanwhile, food and industrial ethanol plants operated at an average of 45% of capacity in the first seven months.

USDA Post also says China will likely turn to Brazil for a substantial amount of corn imports in 22/23 considering current US corn prices, which were nearly +$30/per metric ton higher at the beginning of October. Brazil is expected to be eligible to ship corn to China before the end of the calendar year, earlier than the planned timeline of mid-2023. This follows the signing of a phytosanitary protocol that waives a key clause to allow for certain GE traits found in Brazilian corn. Brazilian traders are projecting over 1 MMT of corn exports to China in calendar year 2022. The full report is HERE.

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