China increases its forecast for corn deficit

Prediction lifted to 4.3m tons for 2017-18 crop year over lower output

China on Thursday increased the forecast for its deficit in corn supply in the 2017-18 crop year to 4.31 million tons from the 890,000 tons predicted in September, stoked by lowerthan-expected output and higher anticipated demand.

Corn output is expected to drop to 210.1 million tons versus last month’s forecast of 212.48 million tons, the Ministry of Agriculture said.

The ministry noted that less land had been planted with corn than earlier thought following reduced government support.

Corn consumption will come in at 215.62 million tons, compared with last month’s forecast of 214.57 million tons, thanks to stronger-than-anticipated demand from ethanol plants, the ministry said in its monthly Chinese Agricultural Supply and Demand Estimates.

The Chinese government plans to roll out blending of ethanol across the country’s gasoline supply.

As much as 15 million tons of ethanol will be needed when the policy is implemented, according to Reuters’ calculations, or about 45 million tons of corn.

Corn transported out of Northeast China will fall to less than 30 million tons in the coming 3 to 5 years from current levels of around 50 to 60 million tons, said Cherry Zhang, a senior corn analyst at Shanghai JC Intelligence Co.

China may need to import between 10 and 20 million tons during average harvest years to fill the gap, she noted.

The deficit in supply in China, the world’s top consumer of grains, could support prices that have been under pressure from the recently started harvest. Dalian corn futures have lost around 1 percent this week so far as the harvest in most regions begins.

Some farmers plan to hold their crops back from the market. However, they are betting that prices could rally later in the season.

The larger deficit is also good news for China, which has been trying to scale back its production of corn and still needs to get rid of millions of tons of aging corn held in State warehouses after a year-long stockpiling program.

China’s crop year for grains runs from October to September.