FAO makes historical 15% upward revision of China corn stocks

Concerns that China's import needs for corn may have been vastly overestimated have been reinforced after the country's inventory estimates for the agricultural commodity were "raised significantly".

In its latest world supply and inventory estimates, the UN Food and Agriculture Organization was commenting on global inventory forecasts for corn, a leading feed source for livestock and poultry, as it made historical adjustments to Chinese stocks.

Chinese corn stocks for the 2014-15 crop year were revised up by 15 per cent to 95.4m tonnes.

The forecast revision follows a sharp downward revision in January by the US Department of Agriculture, which cut its medium-term predictions for Chinese corn imports.

The new FAO numbers will be a further blow to leading grain exporting countries such as the US, as well as leading agricultural traders, which have been gearing up for increases in Chinese corn imports.

China is already the largest importer of soyabeans and agribusinesses and growers had expected the country to also increase its corn imports over the coming years as demand for meat increases with rising incomes.

Although in 2014, the USDA reckoned China was set to become the largest importer of grain, mounting evidence of rising inventories and falling demand triggered a rethink.

Last year's long-term import forecast of 22m tonnes for 2023-24 has been reduced to just 6.5m.

The FAO said that it had reduced the estimates of corn used for feed for 2004-09, which meant that the extra supply would have been shifted to inventories.

As a result, inventory numbers for the past decade had been revised, with 2014-15 numbers increased from 82.7m tonnes to 95.4m tonnes.

That estimate is higher than that of the USDA, at 79.2m tonnes and International Grains Council's 85.7m tonnes.

Abdolreza Abbassian, senior economist at the FAO, said there were worries that the numbers were still underestimating the stock levels in China.

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The increase in historical stock numbers by the FAO coincides with bumper crops in 2012 and 2013 and an abrupt drop-off in consumption over the past few years.

On top of favourable weather, crops were also higher due to Beijing's farmer policies, which provided higher domestic support price for corn compared with international prices.

Not only did this encourage domestic production but also purchases of cheap imports as global grain prices plunged.

The Chinese have also diversified their feed imports, switching to barley and sorghum, which are not only cheaper compared with corn but have no domestic import quotas.

According to the IGC, global grain trade rose to an all-time high last year thanks to the international buying of barley.

The intergovernmental group said in its latest report that estimates for the world trade of wheat and coarse grains had risen to 309m tonnes, up 1.6 per cent from a year before.

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