World Grain - March 2021 - 36

FEATURE: CHINA DRIVING BULL GRAIN MARKET

United States is becoming more important in terms of
trade and exports in the years to come. Because of the demand both domestically and for export, along with some
FURSIDLOXUHVLQWKH8QLWHG6WDWHVZLWKDÀDVKGURXJKWODWH
last summer, we are seeing stockpiles of corn, soybeans
and wheat falling to their lowest level in the last seven
years. This is why the United States is a leader in terms of
upside potential pricing. "
He said China this year will probably import close to 37
million tonnes (of feed grains).
" That includes about 17 million tonnes of corn, as itemized by the USDA, " Basse said. " This number may be too
low, however, and I would not be surprised that by the
end of the year we see China importing a record amount
of feed grains. One of the key demand drivers that emerged late
last year was China's revitalization of their hog industry. These
are hogs that are now being produced in biosecure facilities. "
He described the new farms
as " hog hotels " and explained
that they require more maize and
soymeal than the old-style facilities they have replaced.
" For some period of time, the
Dan Basse, president, Chinese farmer has been makAgResource ing between $250 and $450 per
head, " he said. " That is a huge
incentive for China to rebuild the hog herd. "
Meat production in China dropped sharply, 11.3%, because of African swine fever. However, animal feed consumption only fell 3.7%, he said.

I have never seen, in
my 42-year career,
such a change from
a supply bear to a
demand bull, a lot
of that due to the
United States.

China's corn stocks depleted
Rosa Wang, grain market analyst for consultants JCI, explained that China's corn imports surged in 2020, after
the country's temporary reserve stocks had been depleted.
Corn area fell for four consecutive years.
" Production has decreased by 30 million tonnes from
the peak level while at the same time industrial processing
capacity has increased by 40 million tonnes in the recent
IRXUWR¿YH\HDUVZKLFKTXLFNHQHGWKHSDFHRIFRUQGHstocking, " she said. " The surge of China's corn imports
in the year 2020 is also closely related to China's trade
agreement with the US, known as the Sino-US Phase 1
trade deal. Due to the deal, China will need to make large
purchases of US farm produce. Corn is one of the important things. As for the year 2021, we estimated that China's
FRUQLPSRUW¿JXUHFRXOGVXUJHWRRYHUPLOOLRQWRQQHV´
China has adopted many ways to improve domestic
consumption while at the same time actively importing
grains from other countries, she said.
7KHFRXQWU\SODQVH൵RUWVWRLQFUHDVHFRUQDUHDLQ
36

" The current corn yield in China is only 60% of that of
the US and 75% of that of Argentina, " she said. " China
has great potential to increase its corn yield. "
One way to do that is the commercialization of
GM crops.
" China has a great potential of corn yield improvement,
which could be achieved from commercialization of GM
crops, " she said. " In two years ... the commercialization
of GM outcrops could start in China. "
Wang estimated that the use of GM crops could increase
Chinese corn output by 20 million to 40 million tonnes. It
also is expanding imports of other products, such as meat.
³,QWKH¿UVWPRQWKVRI&KLQDLPSRUWHGRYHU
million tonnes of meat products, which equals 25 million
tonnes of corn, " she said. " Import of energy products such
as fuel ethanol could also be viewed as importing corn. "
China has no problem of wheat supply shortage, she
said, but explained that it does lack high quality.
" China is short of the high gluten and lower gluten
wheat, " she said.
In 2017, production of high-quality wheat in the main
producing areas, Shandong, Henan and Hebei, was just 5
PLOOLRQWRQQHV&KLQDLVPDNLQJH൵RUWVWRLQFUHDVHLWVVHOI
VX൶FLHQF\LQWKHVHW\SHVRIZKHDW
Low energy prices impacting Russia
Sabina Sodikova, country manager for Agrozan
Commodities DMCC in Russia, said the country was " inÀXHQFHGWRRPXFKE\RLODQGJDVSULFHV´
" When oil and gas prices are decreasing, the government has to reduce the ruble level just to have more budget, " she said, also pointing out that COVID-19 had had
D VLJQL¿FDQW DGYHUVH H൵HFW RQ WKH ZLGHU HFRQRP\ EXW
particularly on logistics. " When world wheat prices have
FRQWLQXRXVO\EHLQJJRLQJXSIDUPHUVKDYHYHU\JRRG¿nancial stability. "
In particular, they were able to increase storage capacity.
" Support from the government allows them to build
warehouse structure and store the commodities, " she said.
That gives them the ability to hold onto grain while
they wait for price increases. This, in turn, creates problems for exporters.
Sodikova described the rise of the VTB Group as the
major player in grain logistics. The company now owns,
IRUH[DPSOHRI5XVVLD¶VJUDLQFDUU\LQJUDLOYHKLFOHV
³7KLVLVDOOJLYLQJWKHPPRUHÀH[LELOLW\LQWKHSULFLQJ
where they can play a little bit higher than at the adjustments in the market, " Sodikova said.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: cajlyddon@gmail.com.
We want to hear from you - Send comments and inquiries
to worldgrain@sosland.com. For reprints of WG articles,
email reprints@sosland.com.

March 2021 / World Grain / World-Grain.com


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World Grain - March 2021

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