Corn outlook 2017 in China: down in planting and price

Market analyst firm CCM has analysed the key trends of corn in 2016 and gives an outlook for the possible development of the corn market for 2017. 

 

CCM’s research reveals, that both the planting area of corn as well as the total yield in 2016 have decreased in China. However, looking at the supply and demand situation for corn in 2017, the demand is very likely to stay stable and therefore the domestic supply will be enough to meet the total demand. As a result, the planting areas are going to be reduced once again, while the price of corn may even fall under the value of 2016.

 

2016
 

The total planting area of corn decreased by 3.11% in 2016, compared to 2015. As a result, also the harvest of corn experienced a fall down by 5 million tonnes year on year. The total yield has been 219 million tonnes, according to CCM.

 

Looking at the demand for corn feedstuffs and industry, both have shown an increase in 2016. This trend can be explained by the immense rise of live pig farming in China, especially in the first half of 2016. Other factors, that favoured the rise, has been dropping imports of substitutes for corn, namely sorghum, barley, and DDGS. In numbers, the demand for corn feedstuffs has stated a growth of 2 million tonnes in 2016, while corn industry even achieved a growth of more than 4 million tonnes, according to CCM.

 

The price of corn in China in 2016 was suffering a low value, compared to 2015. This was mainly due to the weakening supply and demand situation, combined with China’s corn stockpiling strategy. However, even the low domestic corn prices were still higher than the imported prices, which showed an average price of about USD50/t higher than domestic prices.

 

The import of corn fell dramatically in China in 2016, namely by 42.5%, according to CCM’s research. The biggest exporting nation with a share of almost 90% was Europe’s corn field, the Ukraine.

CCM predicts, that the supply-demand situation for corn in China will remain imbalanced in 2017, with a surplus of supply, even facing a continuing decreasing planting area. The reason is the huge stockpile of corn, that will be used to meet the demand as well.

 

CCM has analysed four main reasons, that are very likely to surge the corn demand in China in the year 2017. According to the research, China plans to offer export subsidies for deeply processing products. Especially in the northern part of China, subsidies for deep-processing enterprises are going to be implemented. Corn-based fuel is very likely to grow in 2017, which will raise the demand for corn as the raw material. Finally, a rising live pig market will demand more corn, which will be hardly substituted by decreasing imports of substitutes as well as less wheat usage.

 

As mentioned before, the planting area of corn will be further decreased in 2017 as part of the restructure plan of corn planting. The area of effect will be about 666 thousand ha.

 

CCM predicts, that the price of corn in China, 2017, will be even lower than it was in 2016. The final trend is surely depended on the market and supply situation, but the changing strategy of China’s government to not buy any corn itself, but support domestic enterprises to buy the corn. This changing policy puts a huge pressure on the corn price in 2017.

 

What’s more, according to Reuters, another plan of China’s government to reduce its massive corn inventory, is the investment in the bioplastic industry, with corn as the raw material. The products, that can be made from corn are bio-plastic commodities like bags or plates. Most of the corn inventory of China’s government consists of poor quality corn, that is not eatable by its population. Therefore, the use fits either for feed or bio-plastic production.