China's stockpiling of corn and wheat to prevent price declines is a far cry from the record highs of 2011
In September 2011, the Chinese corn market was at a record high due to increased demand.
China used 105 million tons of corn per year at that time for animal feed, with another 60 million to 70 million tons used in the processing sector for such products as starch, citric acid and ethanol. Increased meat consumption in China generated extra demand for corn as animal feed, and industrial demand for starch and ethanol was increasing, putting pressure on corn imports.
Fast forward to 2016 and China’s massive stockpiling of commodities such as corn and wheat has the global market on edge.
Corn ending stocks in China are forecast down by 2.0 million metric tons (mmt), according to the latest Feed Outlook report from the U.S. Department of Agriculture Economic Research Service (ERS), but with 111.5 mmt in store, the country holds more than half the world’s corn stocks.
China has created a degree of artificial scarcity by holding large inventories, making global markets nervous. It has a year’s supply of corn in storage after buying up large portions of the past four corn crops to prevent prices from falling.
The country began subsidizing cultivation and stockpiling farm commodities, including rice, in order to achieve food security. However, global prices have since declined markedly and the stocks are deteriorating, yet officials fear havoc on the markets if they let the crops out.
China corn crop to hit record high in 2011
China’s corn crop is expected to hit a record high of more than 180 million tons, though a continued strong increase in domestic demand means the growth is not likely to offset an increase in imports, according to reports.