Ag Policy Blog

What's a Hundred Million Tons of Corn Among Friends?

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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A chart from Rabobank showing its projection on China's corn reserves. The figures are more than double what USDA projects for China corn stocks.

In the latest query on a confusing numbers situation, an economist at Rabobank looking into China's corn production, reserves and policy concluded over the weekend that his numbers are right and USDA's figures are wrong.

The issue isn't exactly a rounding error. It's the difference of about 5.4 billion bushels. The analyst for Rabobank states USDA is wrong in its assessment of China's corn inventory.

I voluntarily got caught in the middle of this numbers game over the past several days. It began when another editor thought it would be a good idea to get a copy of this Rabobank report on China's evolving corn policy and write up a small piece on it.

Sure, I can do that without any problem whatsoever. These things are usually a piece of cake. You have a report with a bunch of numbers, details on what is going on in that other country -- in this case, China -- and some analysis on what this might mean for export countries such as the U.S.

Except I had a hard time wrapping my head around one number. Rabobank's report cited that China's corn stocks are 250 million metric tons. The USDA WASDE lists China's corn ending stocks for 2015-16 at 110 million metric tons.

The Rabobank analyst go back to me over the weekend. He pointed out the 250 million metric ton figure "is the consensus in China, among analysts from multinational trading houses and research bodies." It should be noted that several news organizations have reported since March that China has 250 million metric tons of corn in reserves.

The analyst noted the Chinese government purchased 125 mmt of corn in 2015-16 through a stockpiling program in NE China. The government has sold some quantities and will do so more as the summer wraps up. Rabobank estimates China will sell about 50 mmt to the market in 2015-16.

By the end of the year, China will have 62 million metric tons added to its reserves, which came into the marketing year at 125 million metric tons.

Thus China began the marketing year at 125mmt, added 125 mmt then will sell of 50 mmt in the coming months. Given that China is expected to have 62 mmt added to reserves at the end of the year, that puts the stockpile at 187- 200 mmt of corn stocks at the end of the marketing year.

USDA, however, doesn't buy those numbers. Jerry Norton, chairman of the World Agricultural Outlook Board, (WAOB) also responded to me Friday regarding this spread between the WASDE and others. The outlook board "views the 250 mmt figure, not as an ending stock estimate, but as an interim measure of stocks much like the December 1 or March 1 stocks reported by NASS in the quarterly Grain Stocks reports."

Norton notes China has no survey estimate for corn stocks and considers such details as a state secret. However, USDA also has tried to track China's production, supply, demand and carryover since the 1960-61 crop year.

"WAOB has struggled with the issue of China’s corn stocks over the years, as I’m sure the Rabobank analysts do, but because each marketing year’s ending stocks are the next year’s beginning stocks in a balance sheet construction, year-to-year changes in stocks are limited by the size of the crops, trade data, and assumptions about domestic use," Norton added.

Nonetheless, Norton noted that while it is difficult to know China's exact corn stocks, considering projected demand estimates since 2009-10, "it is difficult to double the level of ending stocks that WAOB projects for China at the end of the 2015-16 marketing year."

Talking with DTN analysts about such topics, we're left wondering about the quality of those stocks, regardless of whether China has 4.4 billion bushels of ending stocks or 9.8 billion. We're also wondering why Chinese officials allowing such a high volume of hog culling -- roughly 10 million sows in the last two years -- and allowing pork imports to soar if China was sitting on such a large stock of domestic feed.

The article: China's Corn Glut…

Follow me on Twitter @ChrisClaytonDTN.


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