USDA took months to heed warnings over China corn stocks outlook
By Mark Weinraub CHICAGO - U.S. Agriculture Department (USDA) officials took months to change the agency's estimate of Chinese corn supplies even after being warned during multiple visits to China that its stocks view was too low. Analysts told U...
By Mark Weinraub
CHICAGO - U.S. Agriculture Department (USDA) officials took months to change the agency's estimate of Chinese corn supplies even after being warned during multiple visits to China that its stocks view was too low.
Analysts told USDA officials during the summer that the supply picture was "very wrong", a Chinese source said, but the government waited until Tuesday to adjust its balance sheet -- hiking its estimated of China's corn stocks 26 percent.
"They do not believe that China's animal feed production kept decreasing over the past two years, they simply look at China's strong soybean imports, with record soy imports, how can corn demand be so bad?" said Li Qiang, senior analyst with Shanghai JC Intelligence Co. Ltd.
The Chinese government does not publish grains consumption figures.
The USDA argues that China's meager import program for corn - the country is projected to import just 3 million tons in the 2015/16 marketing year - makes it difficult to gauge stocks as the majority of supplies come from domestic sources.
"We know how much they are buying from us and we have a pretty good idea how much they are buying from other (countries) in terms of soybeans, corn and feed grains," USDA chief economist Robert Johansson told Reuters. "It is always a tough one trying to estimate China feed use, China stocks."
Chinese corn stocks typically do not leave the country.
Although the market had been rife with talk of higher Chinese corn stocks, the size and timing of the USDA's change came as a surprise.
Analysts had expected the USDA to raise its forecast for total world ending stocks of corn by 600,000 tons instead of the 24.08 million increase. The forecast for Chinese ending stocks ballooned to 114.44 million tons from 90.61 million just a month earlier.
"It goes back to the questions raised at the Data Users Meeting (in October), why does the USDA not warn us before making massive revisions?" said Terry Reilly, senior commodities analyst with Futures International.
Some analysts said the USDA changed the data now because the November supply and demand report is used for the USDA's annual 10-year agricultural projections which are issued in February.
"Everyone in the trade knew that China's stocks were bigger that what USDA had been saying. And the new number is probably still too low," said a U.S. corn export trader with a large multinational grain company.