Corn crops in the U.S. and China have entered the critical pollination and ear filling stages. As the number one and two corn producers and users in the world, what happens in the next 60 days will determine world corn supplies for the upcoming marketing year. Recent purchases of U.S. corn by the Chinese have raised issues about Chinese production, consumption and trade in the immediate years ahead.

USDA recently estimated U.S. corn area to be harvested for grain in 2010 at 81.0 million acres (32.8 million hectares), up 1.4 million acres (0.6 million hectares) from the 2009 crop. USDA used a simple linear trend of the national average yield for 1990-2009 adjusted for 2010 planting progress to project a yield of 163.5 bushels per acre (10.3 metric tons (MT) per hectare), down slightly from the record large 2009 yield. In early August USDA will release its first yield estimate for 2010 based on actual field conditions as of August 1. U.S. production for 2010 is now projected at a record 13.25 billion bushels (336.6 million metric tons (MMT)). The U.S. is expected to supply 55-60 percent of the 90 MMT of corn traded internationally from the 2010 crop.

For China, USDA estimated corn area harvested for grain at 30.8 million hectares, up 0.4 million hectares from last year. Yield per hectare is projected at 5.4 MT, up from 5.1 MT last year, but short of the record 5.6 MT in 2008. Total production is projected at 166 MMT, up from 155 MMT in 2009 and the same as the 165.9 MMT record harvested in 2008. Imports for the current 2009/10 marketing year are estimated at 1.0 MMT, with imports of only 0.1 MMT projected for the 2010/11 marketing year. Carryover supplies at the end of the 2010/11 marketing year are projected at 59.9 MMT, up from 53.0 MMT at the end of this year and last year.
China’s imports of 1.0 MMT for the marketing year are not large compared to other importers. Japan regularly annual imports are 16 MMT, Mexico 8 MMT, South Korea 8 MMT, Egypt 5 MMT, Taiwan 4 MMT, Columbia 3 MMT, Iran 3 MMT and Malaysia 3 MMT. A few countries show great variability in imports. The EU countries are importing 2.5 MMT this year, but imported 7 MMT in 2006/07 and 14.0 MMT in 2007/08 after two consecutive years of below average grain crops.

Corn consumption in China has been on a steady uptrend for the past ten years with 2010/2011 consumption expected to be a record large 159 MMT. The majority of consumption continues to be for livestock and poultry feed, but that growth has slowed in recent years. In 2006/07 livestock and poultry feed was 104 MMT and is projected to be 110 MMT in 2010/11, a 6 MMT increase. Total consumption is expected to increase 14 MMT from 2006/07 and non-feed uses, like starch, sweetener and ethanol, to increase by 8 MMT. Imported cassava, estimated at 6.1 MMT in calendar year 2009, could take more of that market depending on the price of corn. Imported distillers dried grains with soluble, a high protein co-product of ethanol production, increased to almost 0.7 MMT in calendar year 2009 from almost zero in 2008. Imports are expected to increase again in 2010.
Earlier this year, the Chinese government recommitted to a long-term self-sufficiency objective in grains through 2020 of over 95 percent. Grains include wheat, rice, corn, barley, sorghum, potatoes and pulses. According to the U.S. Agricultural Attaché in China, the National Development and Reform Commission (NDRC) issued a detailed plan in November 2009 to raise annual national grain production capacity by 50 MMT by 2020, a 10 percent increase from the current annual goal. NDRC estimates yields need to increase 0.9 percent per year. Corn accounts for about 30 percent of total grain production.

With a growing population and increasing per capita incomes, the NDRC believes that grain demand will inevitably increase. Imports on a regular basis are considered to not be a viable alternative because the international market is relatively small compared to China’s large expected demand, international markets have wide price volatility and biofuels have added to the demand. Constraints for China to overcome in domestic production include accelerated industrialization, migration of the agricultural labor force, deteriorating labor quality, rising uncertainties of weather and worsening environment. The NDRC plan concentrates on maintaining the grain growing area, increasing irrigation, improving the seed supply and using more mechanization. Yields per hectare are critical. According to NDRC estimates, rice yields are 71 percent of the yield of the ten countries with highest yields, wheat is 60 percent and corn is 67 percent. For corn specifically they will develop biotech seeds, increasing the number of plants per acre, develop disease and pest resistance and have corn suitable for mechanized farming.

China is already a leader in using plant biotechnology to improve seed and has grown insect resistant biotech cotton since 1997. In November of last year they approved a biotech Bt rice and biotech phytase corn with commercial production expected in about two years. According to the U.S. Attaché, more biotech crops are in the pipeline. China’s biotechnology research is primarily based at public universities with national and provincial funding. Regulators have reviewed safety and approved over 200 varieties of cotton, corn, rice, petunia, sweet peppers, papaya, tomato, and poplar trees. Others are in advanced trials, but have not been de-regulated by the Ministry of Agriculture. Of 17 publicly listed biotech crops, rice is undergoing the most research. Insect and virus resistance is the most frequent trait, including an insect resistant corn, with half of the crops in the commercial stage of development. A longer list of traits in the early experimental stage undoubtedly exists, but the Ministry of Agriculture has not released it.

China importing corn from the U.S. this year is probably not an immediate indicator of the likelihood of importing substantial amounts of corn over the next few years. The Chinese government appears to be anticipating the need to continue to increase production by increasing yields, since land area devoted to corn is not likely to continue to increase. Even with a comprehensive plan to increase output to meet growing demand, there will likely continue to be a need to import corn some years to maintain an adequate level of food security.