Chinese Corn’s Crossroads – Upcoming Shortage Requires Changes
China’s corn ending inventories have declined by over 20% since the state stockpiling programme was abolished in 2016. Rabobank expects inventories to further drop in the coming years, potentially to critically low levels. Market-driven corn price increases will incentivise acreage rebound, but can only be part of the solution. Policy reforms, on domestic production and feed grain imports, are required within three years.
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“To examine the near-term outlook for Chinese corn, Rabobank conducted a scenario analysis for the years through 2021/22. Three scenarios were considered, ‘high-production’, ‘high-import’ and ‘combined,’” according to Lief Chiang, Analyst – Grains & Oilseeds. “But only the 'combined' scenario – in which the increase in domestic production and imports matched the forecast consumption growth – allows China’s corn market to rebalance in the forecast period. However, this scenario also requires policy reforms.”
In the other scenarios – solely relying on either 'high production' or 'high import' – supply will not keep up with consumption, resulting in inventory depletion to critically low levels, or consumption will be forced to drop considerably as corn prices continue to soar. Surging prices will further squeeze corn processors’ industry margins.
Where to go from here
Lief ChiangAnalyst - Grains & Oilseeds
RaboResearch Food & AgribusinessPO Box 17100 (UC 053) 3500 HG Utrecht, The Netherlands