Chinese corn production may be on its way back up again

By Sean Pratt

China's corn production seems to be back on track after a five-year hiatus, but one analyst isn't expecting a return to bloated government stockpiles of the crop.

The country produced 273 million tonnes of corn in 2021, according to recently released official Chinese government estimates.

That is a 12 percent increase over the previous year's production and a return to the steep path of growth that existed prior to 2015, according to the Dim Sums blog.

China produced 273 million tonnes of corn in 2021, according to recently released official Chinese government estimates. | Reuters photo

Chinese farmers produced a massive crop in 2015, prompting the country's agriculture ministry to implement a "supply side structural adjustment" initiative aimed at curbing corn production in favour of other crops such as beans, minor grains and fodder crops.

China had a glut of corn and wanted to reduce plantings in environmentally sensitive areas.

"That plan was conveniently forgotten after several years of corn auctions emptied out warehouses and corn prices shot up in 2020," according to the blog.

China has become a huge importer of the crop, something exporting nations had been counting on for many, many years before it finally occurred.

The country imported 26 million tonnes of corn in the first 10 months of 2021, according to Dim Sums. That is more than triple the 7.8 million tonnes purchased during the same period a year ago.

It is one of the main reasons behind the 2021 rally in grain and oilseed markets.

The meteoric growth in China’s corn production appears to be back on track after a five-year hiatus caused by a policy shift and poor weather conditions. | Source: Dim Sums blog

However, the Chinese government has now returned to actively encouraging corn production. Chinese president Xi Jinping appears to be worried about a possible U.S. food embargo, according to the Dim Sums blog.

"We must not let others become a choke point for the basic national survival issue of eating," Jinping said in a recent statement.

Chinese farmers planted 107 million acres of corn this fall, just four million acres below the 2015 peak that produced the huge glut of the crop, the blog said.

MarketsFarm analyst Bruce Burnett is not concerned about China returning to its former status of having overflowing government reserves of the crop that weighed down world corn prices.

"I don't see it as this permanent surplus that's going to overhang markets," he said.

That is because Chinese corn demand continues to grow at a steady clip due to the country's ever-expanding population and improving diets.

"I just don't see it as being a permanent feature here where China sort of runs away and doesn't buy any corn from the international market," said Burnett.

There is a large geographical gap between where China's corn is grown in the north and where it is consumed by the country's livestock sector in the south, so in many cases it is more economical to import the crop from foreign suppliers such as the U.S.

As well, he said China's five-year lull in production was also partially caused by weather constraints, which could re-emerge at any moment.

If government reserves start to grow again, they can always be depleted by reinstating the nationwide E10 ethanol mandate that was announced in 2017 and then subsequently abandoned when corn prices started to soar, said Burnett.