Chinese Whispers - Again

As long ago as September, Shanghai-based JC Intelligence flagged up that all was not quite right with the Chinese corn crop. Back then they said that the crop would drop by around 20 MMT to 146 MMT. This week they have said that it could be nearer 140 MMT.

That's fully 23 MMT below the current official estimate and 15 MMT below the USDA. Even the normally over cautious US officials in Beijing have been voicing concern over the accuracy of the official government estimates of late.

With the USDA estimating Chinese consumption at 159 MMT in 2009/10, if the private Chinese estimates are correct, the we are looking at a shortfall on production of 19 MMT in the current season.

Before you all get too carried away, Chinese ending stocks are forecast at almost 49 MMT this year (and that is using the USDA's production number, not the official estimate), so it would appear unlikely that imports are imperative this year.

In addition, although Chinese corn prices have risen somewhat recently, they are still around USD35-40/tonne cheaper than importing corn from the US.

There are question marks too over the size of the 2009 Chinese wheat crop. Official and USDA estimates of around 114-115 MMT may also have been overstated many private analysts think, with production nearer 100 MMT more realistic.

Again though, with a domestic consumption of 102 MMT, that's hardly going to make much of a dent in government stockpiles, estimated by the USDA at more than 60 MMT.

Other news out today says that China's economy expanded by 8.7% in 2009, according to the National Bureau of Statistics. That comfortably beat government forecasts, and might be aiding inflation, which explains the recent tightening of monetary policy.

Of course, just because the Chinese government say that growth is up 8.7%, doesn't mean that it actually is.

Certainly China wants keeping an even closer eye than normal on in 2010.