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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

09 March 2012

USDA GAIN: China Grain and Feed Annual 2012USDA GAIN: China Grain and Feed Annual 2012

For MY 2012/13, corn production is forecast at 190 MMT assuming an above average yield and good temperatures. In MY 2011/2012 corn production is estimated at 191.7 MMT due to expanded acreage and record yields. For MY 2011/12 and 2012/13, wheat production is projected at 118 MMT. The current winter crop conditions are rated above normal. MY 2011/12 and 2012/13 rice production is forecast at 200 MMT.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

In MY 2011/12 and 2012/13 China corn imports are projected at 4 MMT due to continued strong feed and industrial demand. For MY 2011/12 and 2012/13, China’s wheat imports are forecast at 1.5 MMT and 1 MMT on continued demand for high quality wheat for processed flour products.

Executive Summary:

For MY 2012/13, corn production is forecast at 190 MMT assuming an above average yield and good temperatures. In MY 2011/2012 corn production is estimated at 191.7 MMT due to expanded acreage and record yields. For MY 2011/12 and 2012/13, wheat production is projected at 118 MMT. The current winter crop conditions are rated above normal. MY 2011/12 and 2012/13 rice production is forecast at 200 MMT.

In MY 2011/12 and 2012/13 China corn imports are projected at 4 MMT due to continued strong feed and industrial demand. For MY 2011/12 and 2012/13, China’s wheat imports are forecast at 1.5 MMT and 1 MMT on continued demand for high quality wheat for processed flour products.



For MY 2011/12, wheat production is estimated at 118 MMT, up 3 MMT from last year due to favorable weather. For MY 2012/13, total planted area is stable, and production is projected to be unchanged on expectations of continued good weather conditions and an above average yield. Winter wheat acreage accounts for 93 percent of China’s total wheat area, or 24.3 million Ha.

For MY 2012/13, weather reports stated that the north China Plain experienced less snow coverage than in previous years, but it is currently unclear what impact this may have for the upcoming crop. Generally, on an annual basis, dry northerly winds and less rainfall commonly occurs during the winter, often causing dryness. Although drought can potentially be a concern, irrigation is readily available in major wheat production provinces. The current winter crop conditions are rated above normal.

A recent MOA survey noted that more farmers were using better farm management practices, such as deep plowing and better fertilizer application, although it is unknown on what scale this might be occurring. In the last few years, Post’s field survey found that some farmers have begun planting higher quality seeds that allow for more populations per hectare, which would potentially raise yields. For more information on wheat varieties, production practices, and other aspects, please see Gain report CH11014. For more information on wheat seed production, please see Gain report CH12009.

In order to encourage wheat production, since 2004 the government has raised the floor purchase price for winter wheat (see Policy section). This guaranteed floor price reportedly has provided a strong incentive for farmers to raise planted acreage. In MY2012/13, relatively higher profit potential for other competing crops, such as winter rapeseed, may affect further increases in wheat acreage.


For MY 2011/12 and MY 2012/13, feed consumption is expected to rise due to higher corn prices. During the summer of CY 2011, the price spread between wheat and corn reached more than RMB 400 per ton, and since October 2011 the average spread has been around RMB 100 per ton. Depending on prices, some feed mills use higher quality milling wheat in their feed formulas. Chinese feed mills have replaced 100 percent of corn for some poultry feed, such as duck feed, as well as approximately 20 to 40 percent of corn for hog feed (primarily for grower and finisher pigs). That being said, some larger feed mills attest that they can utilize 100 percent of wheat in their hog feed formulas. For feed safety concerns, mills may also prefer wheat because of high toxin levels (such as mycotoxin) that can be found in Chinese domestic corn (reportedly due to excessive rainfall during harvest). For more information on the livestock sector, please see Gain report CH12017 and CH1143.

In MY 2011/12 and MY 2012/13, industrial use is projected to rise approximately 1 percent to 98.5 MMT and 99.5 MMT, respectively. Starch and ethanol producers, and other industrial users, are expected to substitute more wheat for corn because of rising corn prices.

Consumer demand continues to grow for convenience foods, including instant noodles, biscuits, and bakery products. Unlike traditional homemade or home-style Chinese food products, convenience foods require wheat flour with specific gluten and protein content. Domestic flour millers meet these requirements by utilizing imported wheat and blending it with domestic varieties.


For MY 2011/12, Chinese wheat imports are estimated at 1.5 MMT, 50 percent higher than the previous year. Total wheat imports are projected to exceed the private Tariff Rate Quota (TRQ) of 960,000 tons, as reports indicate that 500,000 tons were recently purchased using the state TRQ. Industry contacts said that a state owned enterprise utilized the state TRQ to buy less expensive Australian wheat, and sold the wheat to the feed market in Guangdong to take advantage of rising corn prices. This transaction may be market arbitrage, and not an indication of low wheat stocks.

In MY 2012/13 wheat imports are forecast at 1 MMT. The state TRQ is not projected to be used for wheat imports. The private TRQ is primarily utilized to import high quality wheat (See wheat consumption section). For MY 2012/13, China’s wheat exports are estimated at 1 MMT, unchanged from the previous year. The government of China controls exports by providing export licenses only to state trading companies, such as COFCO. Since 2008, the Chinese government also has actively discouraged exports by removing the VAT export rebate (13 percent), which makes the wheat less price competitive in the international market. China primarily exports flour or processed products to neighboring countries, including North Korea, Hong Kong, and South Korea. In CY 2011, China provided some food aid (wheat and rice) to Ethiopia.


A private company or state owned enterprise must attain a license from the government to purchase and distribute grain. Special low interest loans to purchase wheat are available only for state grain companies.

In order to mitigate price increases, in January 2011 the government stipulated a temporary policy that only large flour mills could attend wheat auctions (See Gain report CH11014). However, during MY 2011/12 most purchases have been made outside government auctions (many mills and businesses contracted directly with farmers or distributors). That being said, if flour prices significantly rise, the government could instruct state owned grain reserve companies to supply wheat to large-scale flour mills. These mills would then be required to increase their production, and sell the product at a government-set price.


There are no official statistics available for wheat stocks. For MY 2011/12 and MY 2012/13, Post estimates ending stocks at 61.7MMT and 58.2 MM. Most of China’s wheat stocks are held in northern China by state owned enterprises such as Sinograin.



For MY 2011/12 corn acreage and production is estimated to rise 2 and 8 percent to 33.4 million Ha and 191.75 MMT. Many farmers shifted from soybeans to corn in expectations of a higher profit margin. Favorable weather conditions contributed to record yield. In MY 2012/13, acreage is estimated to rise slightly to 33.7 million Ha, and production is to remain steady at 190 MMT, which assumes a better than average yield and good temperatures. For more information on corn seed production, please see Gain report CH12009. For more information on oilseeds, please see Gain report CH12020.

For MY 2011/2012, in northeast China, there was sufficient rainfall for the major producing provinces, and little to no flooding. Fall temperatures were relatively favorable as the corn matured. According to feed mill reports, in the north China plain, such parts of Henan and Hebei province, excessive rain lowered the corn quality and elevated toxin levels, causing some of the corn to be unusable for feed.

Although biotechnology is viewed as one tool to improve production, no biotech corn varieties have been fully approved for commercial use (See Gain report CH11050).


Corn is used for: 1) feed; 2) the industrial production of sugar, starch and biofuels; and 3) food.

Feed Consumption

For MY 2011/12 and MY 2012/13, feed corn consumption is estimated to increase on rising livestock inventories and meat production, as well as continued farm consolidation. From July 2011, hog inventories rose after surviving a major disease outbreak from the previous year, which included a diarrhea and food and mouth disease epidemic. Due to high consumer demand, within the last few years, pork and poultry (broilers and layers) production has generally risen approximately 3 to 4 percent every year. Hogs and poultry make up approximately 63 and 22 percent of total meat production. For information on livestock, please see Gain report CH12017 and CH1143.

As the livestock sector consolidates, more small backyard farmers continue to exit the business and move to urban cities for work, while larger scaled operations continue to grow. Larger farms use more industrial feeds that are comprised of a higher proportion of corn (or wheat). Small backyard farms purchase concentrate and premix (includes vitamins, minerals, and other microingredients), and blend these products with raw feed (ratios are often a lot lower than industrial feed products) to reduce cost.

MOA’s China Industrial Feed Association tracks national industrial feed production, but there are no official numbers for overall feed usage. MOA’s industrial feed production table (below) illustrates this relative shift within the livestock industry through the higher use of compound feed in lieu of concentrate and premix. This trend is expected to continue into the future.

According to MOA’s 12th 5-Year Plan for the Development of the Plantation Industry in China, the government plans to promote other substitute feed ingredients that can be used instead of corn, such as crop stover and other byproducts from the food processing industry, as well as early season indica rice, wheat, and barley.

In MY 2011/2012, because of relatively high corn prices, which have risen due to high demand from the livestock sector, many feed mills have begun substituting some corn with wheat (See wheat consumption section). This trend is expected to continue into MY 2012/13.

2010-2011 Chinese Wheat and Corn Prices

Industrial Use

Industrial use includes the production of starch sweetener, other industrial (papermaking and textile production), food-grade (e.g. monosodium glutamate), and ethanol. However, starch sweeteners and ethanol comprise the majority of production. For MY 2011/2012, industrial use is estimated at 48 MMT, up 10 percent from the previous year due to increased starch sugar and food-grade ethanol production.

For CY 2011 and CY 2012, ethanol production is estimated to grow more than 10 percent annually, primarily due to high demand for hard alcohol, such as bai jiu. The ethanol sector primarily uses corn, but also can utilize other feedstocks such as wheat, rice, sweet potatoes, sorghum, and cassava. For CY 2011, the China Brewery Association published data illustrating hard alcohol production rising 30.7 percent to 10 billion liters.

For MY 2011/12 and MY 2012/13, sugar prices are expected to remain high on less supply and strong demand from the food processing industry. As a result, demand for less expensive corn starch sugar is expected to grow (see Gain report CH11047). Unlike last year, international sugar prices are expected to be lower (due to larger exportable supplies by major suppliers such as Brazil and India), which may cause Chinese starch sugar to be less price competitive in foreign markets.

Some Chinese policy-makers may believe that growing demand in the starch and ethanol sector has escalated food prices. A recently published draft Grain Law (see Policy section) states that the food processing sector should develop in “an appropriate way,” or suggests that companies should not grow rapidly, which might adversely affect China’s grain supply and food security.


For MY 2011/12 and MY 2012/13, imports of corn are estimated at 4 MMT and 4 MMT due to rising feed and industrial demand. For MY 2011/12, imports have primarily been purchased by the Chinese government using a state quota, which includes a VAT exemption. To date, U.S. exports to China are approximately 2.5 MMT, with remaining contracts estimated at 1 MMT. Industry sources believe this corn has been used to replenish the strategic reserves, and that the government may continue stock the reserves with either imported or domestic corn.

During MY 2011/12, because of relatively lower domestic corn prices, imported corn prices generally have not been price competitive, although recently there has been a price shift. Currently, the U.S. No. 2 yellow corn CIF price (including VAT and in-quota tariff) for March to June delivery to Guangdong is about USD $20 lower than domestic corn. The private sector might purchase imported corn if international prices are competitive as domestic supplies tighten.

According to the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), the United States, Thailand, and Peru are the only countries that have corn market access, although reportedly some neighboring SE Asian countries trade small quantities of gray market corn through Yunnan and Guangxi provinces. In February 2012, Chinese state media reported that China granted a quarantine protocol for Argentine corn, but this has not been officially confirmed by AQSIQ.

Depending on relative pricing, Chinese feed mills substitute corn with DDGS and feed quality wheat, but imported DDGS has become more popular due to its higher quality (protein and lipid content) and price advantages (no VAT or TRQ). For CY 2010, China became the largest importer of US DDGS, purchasing 3.1 MMT. In December 2010, China initiated an anti-dumping (AD) case against US DDGS, which in CY 2011 caused imports to drop 46 percent to 1.68 MMT. The AD investigation has been extended until June 2012.

For MY 2010/11 and MY 2011/12, China’s corn exports are unchanged and estimated at 200,000 MT. The government manages corn exports with tax incentives and export quotas, and within the last few years has not encouraged corn exports with policy incentives. As in previous years, the majority of China’s corn exports are expected to be destined for North Korea as food aid.


While official stock data is not available, from MY 2011/12 to MY 2012/13 Post estimates corn ending stocks to fall from 57 to 55 MMT. With rising meat production and continued consolidation in the livestock industry, Post expects China’s feed demand to continue to put pressure on domestic grain production and supplies.

Unlike last year, to date the Chinese government has not required state owned corn processing companies to stop purchasing corn (See Gain report Ch11014 for more information).



In MY 2011/12, total (rough) rice production is estimated at 200.7 MMT, up 2 percent from last year. Total estimated planted area is 29.9 million Ha, unchanged from the previous year. Early-season Indica rice production is estimated at 32.76 MMT, up 4.5 percent due to favorable weather in major producing provinces. Japonica rice experienced high yields due to sufficient rainfall and good temperatures in northern China, particularly in Heilongjiang province. For MY 2012/13, total (rough) rice production is forecast at 200 MMT, which assumes average yields. Acreage is forecast to rise slightly, as the government may encourage more planting by raising the floor price (see Policy section). For more information on rice seed production, please see Gain report CH12009.


For MY 2011/12 and MY 2012/13, overall rice consumption is projected to rise to 138.5 and 141 MMT. Traditionally, southern Chinese prefer Indica rice while northern Chinese favor Japonica rice. That being said, although more expensive than Indica, on a national level Japonica rice has slowly become more popular due to its perceived superior flavor. Some sources estimate that 60 percent of China’s population eats rice on a daily basis.

Although overall household rice consumption has declined slightly due to shifts in rural household purchases (see General Economic Trends section), in MY 2011/12 industry contacts noted that high corn prices have caused some feed mills or livestock producers to substitute more feed quality rice for corn, particularly in household or small commercial farms in southern China. Moreover, anecdotal evidence suggests there has been a shift towards producing more processed convenient foods (using rice as a main ingredient) for middle class consumers. While there is no reliable data for both of these factors, for MY 2011/12 and 2012/13, Post estimates that feed and industrial (more processed rice products) demand, as well as a population increase (which is less than 1 percent a year) has caused overall rice consumption to rise.


In MY 2011/12 and MY 2012/13, rice imports are estimated at 500,000 MT and 600,000 MT. Most imports are Thai fragrant rice varieties, which are consumed at high-end hotels or restaurants located in affluent coastal cities.

For MY 2011/12 and MY 2012/13, rice exports are estimated at 500,000 MT and 600,000 MT, rising on continued strong demand from South Korea and Japan. Only two state trading companies are licensed to export rice. In MY 2011/12, some rice was exported to North Korea as food aid.


Official national reserve data is not available. Japonica rice is mainly stored in Heilongjiang, while Indica is stocked in some southern provinces. For MY 2011/12, ending stocks are estimated at 44.5 MMT (milled), and are projected down to 43.5 MMT due to growing feed and industrial consumption, and population growth.



In MY 2011/12 barley production is estimated at 2.5 MMT, 26 percent higher than last year due to high yields and increased acreage. Planted area is estimated at 650,000 Ha, up more than 10 percent. Increased brewery demand has pushed up prices, and influenced farmers to expand planted area in Inner Mongolia, Jiangsu, and Gansu provinces. MY 2012/13 production is forecast to rise slightly to 2.6 MMT, assuming average yields and continued planted area expansion on strong demand. China does not consider barley to be an important feed grain, and the crop receives no financial or other assistance.


Chinese barley is mostly used for brewing. For CY 2011, beer production is estimated at 48.9 million kilolitres, up 10 percent from last year. Barley production can only meet approximately half of domestic malting barley demand, which is estimated at 4 MMT for MY 2011/2012. According to industry sources, the protein level for domestic barley is relatively higher than imported barley, and is not very suitable for malting.

China Beer Production 2004-2011 (in 1,000 liter)
(Source: National Statistical Bureau)


For MY 2011/12, imports are estimated at 2 MMT, up 20% from the previous year on more competitively priced exportable supplies from Australia and Argentina. For MY 2012/13, imports are forecast at 2.2MT, a 10 percent increase on expectations of continued expansion in the brewery sector. Australia, Canada, France, Denmark, and Argentina are currently the only countries that have market access to China.



For MY 2011/12, production is estimated up 6 percent to 2.6 MMT due to higher than average yields. Sorghum planted area is 580,000 Ha. In MY 2012/13 planted area and production is forecast to increase 3 and 2 percent on growing demand from ethanol producers (e.g. hard liquor or bai jiu) and assumed favorable weather. Most sorghum is planted on marginal land with no irrigation facilities, and producers receive no government support. Some ethanol plants reportedly have developed contracts with farms to maintain a stable supply.

China Hard Liquor Production 2005-2011 (in 1,000 MT)
(Source: National Statistical Bureau)


The majority of China’s sorghum is used to produce hard liquor or bai jiu. In CY 2011, hard liquor production is estimated at 11.5 MMT, up 30 percent from the previous year. As the middle class continues to grow, hard liquor consumption is forecast to rise. Local governments support hard liquor production facilities since their product generates sales tax revenues.

General Macroeconomic Trends

Rural Household Grain Consumption Projected to Decline

For MY 2011/12 and MY 2012/13, overall household consumption of grains is projected to continue to fall, as more middle class consumers increase purchases of animal proteins. Currently, China’s population is around 52 percent urban and 48 percent rural, annually increasing less than 1 percent per year. Rural households have shown the strongest shift in grain consumption. According to National Statistics Bureau (NSB) data, from CY 2005 to CY 2010, rural per capita consumption of grains dropped from 208.56 kg to 181.44 kg, while per capita consumption of meat, poultry and dairy products rose steadily. Per capita grain consumption for urban households has remained relatively stable in recent years.

Annual Household Per Capita Direct Grain Consumption (in kg)
(Source: National Statistical Bureau)

Annual Rural Household Per Capita Grain Consumption (in kg)
(Source: National Statistical Bureau)

March 2012

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