Former World Board Chair: USDA's China Corn Import Numbers Don’t Add Up
Much of the market reaction after USDA’s October crop report surrounded China. Even though China has more corn purchases on the books than what USDA’s World Ag Outlook Board (WAOB) is reporting in its overall figure, the agency didn’t adjust China’s corn import figure in its latest report.
Seth Meyer is now associate director of University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI), but formerly served as the chairman of the WAOB. He says USDA is running out of time and runway to make adjustments to the export side of the ledger.
“I think they've been holding back out there for lack of a better way to explain it,” says Meyer. “There's about 280 million bushels that go into China cheap, under their TRQ, it goes in with very little tariff, and China has more on the books already purchased from us.”
Current USDA World Board leaders defended the China corn import figure this week during a biannual meeting. The meeting was held virtually this year, but during the call, the economists didn’t waiver, standing behind the decision to leave the import figure for China unchanged.
"Keep in mind that export sales ... do get canceled at times," World Ag Outlook Board Chairman Mark Jekanowski said during a USDA data users meeting.
Currently, WAOB forecasts China’s 2020-21 corn imports from all sources will be at 7 million tonnes. As Meyer pointed out, China current corn commitments just from the U.S. exceed that.
“One of the things we try not to do is forecast changes in policy, including changes in policy by foreign countries,” said Jekanowski during the call.
While Meyer acknowledged the WAOB may be hesitant to update its export forecast until China officially raises its TRQs, Meyer says USDA is going to be forced to update the export figure in the coming months.
“The math no longer works in the position that they have,” says Meyer. “So, I'd expect them to start ramping up Chinese demand within their balance sheets. I don't see another way out of it.”
Meyer says the risks sits with China possibly canceling or rolling orders, but Meyer thinks China is on the verge of announcing expanded cheap imports into the country, which will mean raising its TRQ for corn.
“I think as with anything in China, it's tricky,” says Meyer. “Those are not shipments, those are sales and those can be canceled and rolled. That's why I think earlier when we had all these sales going on for soybeans, folks didn't want to count those chickens before they're hatched, because it is China.”
If China continues to buy corn from the U.S., Meyer says the debate with major substance right now is the reason behind China’s interest in U.S. corn.
“I think in terms of pricing, it's going to raise everybody's boat here if there’s really strong additional demand by China,” says Meyer. “The question the market will continue to have is whether this is storage demand, is this actual transient demand because their crops are a little smaller than they are reporting it to be, or is this the year we finally turn the corner in China become starts to become am increasing grain corn importer, year after year?”
Meyer says the market chatter is betting on China increasing its TRQ for corn, but the larger mystery is the reason behind this demand and if it can continue year after year.
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