Can You Hear Those Alarm Bells?

They've been ringing for long enough, and they're starting to get louder. China appears to have now auctioned off almost all of it's temporary corn reserves, and is now eating into it's more precious long-term strategic reserves.

Auctioning off around a million tonnes of corn a week, as the government have been doing recently, appears to have cooled rising prices for now. How long can they, and will they be prepared to, keep digging into these stocks?

To accurately answer that one, it would be helpful if we knew exactly how large they were (and also importantly what condition they were in). Unfortunately we don't, and those that do can't be relied upon to pass the information on accurately.

It seems fairly widely accepted that the Chinese did not in fact harvest more than 163 MMT of corn last year as the state-sponsored CNGOIC embarrassingly still insist. Some private estimates are as low as 136 MMT, maybe a "fat finger" was responsible?

Whatever, actions speak louder than words, and the sudden arrival of China on the corn import scene seems a clear indicator that production was indeed significantly reduced last year.

So how big are China's corn reserves now? The USDA have them down to finish the current marketing year with 53 MMT, although they still have them down as having produced 155 MMT last year. Some private estimates peg the corn strategic reserve at less than 20 MMT.

With questions already now being raised over the size and delayed nature of this season's corn plantings, how low will the Chinese government let their real reserves get in a country that consumes 3 MMT of corn a week?

Meanwhile moisture levels at harvest time last season were very high, meaning that it's highly likely that there could be a few question marks also hanging over the quality of what corn the government do actually have in store.

Talking of actions speaking louder than words it is also interesting, is it not, that China's famously staunch anti-GMO stance has suddenly casually been waved (or is it waived?) to one side?

China's COFCO have just been confirmed as buying a further three cargoes of US corn today.