Chinese corn imports soar following ASF outbreak


Heading into 2020-21, analysts were convinced that African swine fever would minimize China’s corn imports.

They were wrong.

What it did was eliminate about 30 million tonnes of food scraps being fed to hogs in that country, said Bryan Lohmar, China director for the U.S. Grains Council.

Instead, rations comprising corn and soybeans have now become the standard in China, and that has resulted in a sizeable uptick in corn demand.

“The U.S. Soybean Export Council and the Grains Council have worked for 35 years trying to get that to happen and it took ASF to do it finally,” he told delegates attending the U.S. Department of Agriculture’s 97th annual virtual Agricultural Outlook Forum.

The USDA is now forecasting China will import 24 million tonnes of corn in 2020-21, up from its initial estimate of seven million tonnes.

Lohmar is convinced it will be sustained demand, not just a one-year aberration. And that bodes well for many crops because corn sets the tone for grain and oilseed prices.

Prior to the August 2018 outbreak of ASF in China, the country’s hog herd was consuming 200 million tonnes of feed annually. Half of that was corn.

During ASF there was a 40 percent reduction in hog inventory and a corresponding 40 percent reduction in feed use. However, corn’s share of the feed ration has increased to 75 percent.

That means China’s hogs are eating about 90 million tonnes of corn annually, a 10 million tonne drop from previous levels.

“We didn’t see feed demand take the hit that everybody thought it was going to take,” said Lohmar.

That modest drop in demand was offset by an estimated 10 million tonne decline in Chinese corn production due to typhoon damage in the main growing region of northeastern China.

Lohmar anticipates a full recovery in China’s hog herd. Total feed consumption will climb back to 190 million tonnes, a slight drop from pre-ASF levels due to some feeding efficiencies of modern operations.

He expects corn to maintain its new 75 percent share of feed demand, resulting in 142.5 million tonnes of annual demand, a sharp increase from pre-ASF levels of 100 million tonnes.

Justin Choe, agricultural economist with the USDA’s Office of the Chief Economist, agreed with Lohmar’s contention that the surge in Chinese corn demand this year is likely the beginning of sustained buying from that country.

“There is strong evidence that China’s grain demand, especially corn demand, is structural and will continue in the long-term,” he said.

However, he did not rule out the possibility that China is simply restocking its reserves, which would mean the demand could be fleeting.

He also noted that Brazil does not ship much corn to China, but the two nations are developing close ties and if Brazil starts exporting corn to China, that could change the whole dynamic.

Lohmar said it is hard to discern the exact magnitude of China’s corn shortfall based on the country’s supply and demand figures because the government has a long history of manipulating those numbers, and they often don’t make much sense.

However, the general gist of what is happening can be gleaned by following China’s prices.

“In the last year the prices have just been on a tear in China. They have just gone up enormously,” he said.

Prices are up 50 percent from a year ago with Chinese corn selling at a US$130 per tonne premium to U.S. corn. It is going to take a lot of imports to bring those two prices back into parity.

Chinese corn demand did not shrink as much as many anticipated due to African swine fever. That is because 30 million tonnes of recycled food waste that used to be fed to pigs in backyard operations during the pre-ASF era has largely been replaced with corn used by modern, commercial hog operations. Corn’s share of feed rations has risen to 75 percent from 50 percent, according to the U.S. Grains Council. That will eventually result in 142.5 million tonnes of annual corn demand once swine inventories have fully recovered, up from 100 million tonnes in the pre-ASF era. | Source: U.S. Grains Council

“How much corn could China take? I don’t know. It could be 50 or 100 million tonnes to get this back to equilibrium,” he said.

That volume won’t all flood into the market at once. It will be a controlled program that will result in strong imports for years to come.

China’s tariff rate quota for corn is 7.2 million tonnes, but the government is allowing its state trading enterprises to exceed their allocation of that quota.

Lohmar said Chinese farmers are likely to plant more corn in response to the high prices, but acreage and production increases are limited by environmental concerns and poor soil quality.

China’s feedgrain shortfall is being met in part by government auctions of its wheat and rice reserves.

The government has sold more than 15 million tonnes of its wheat stockpile since Jan. 1, 2021. An estimated 10 million tonnes of that was likely used as feed.

The USDA is forecasting China will consume 30 million tonnes of feed wheat this year, but Lohmar thinks it could be higher than that based on the recent government auctions.

Wheat and rice are strategic crops in China. The government wants to maintain at least one year’s supply of the two crops. Lohmar thinks rice reserves are at that level right now, and wheat may be close by the end of the year.

China can import sorghum and barley, but there are limited global supplies of those crops. Importing more corn is the only real long-term answer to China’s feedgrain shortage, he said.

Lohmar was asked if China’s corn production will rise as the country embraces the cultivation of genetically modified corn.

He said that is a slow process, and he doubts it will be a silver bullet for yields because Bt corn is best at managing below-ground pests such as rootworm. China doesn’t have rootworm. It is more concerned about above-ground pests, which are best controlled with pesticides.

He noted that the adoption of Bt cotton in China only increased yields by about 10 percent or so.