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Veteran Advisor

Thoughts On China

A week ago, Luis Vieira, a freelance writer for Agriculture.com, checked in from China. He made notes about China releasing corn reserves in the future. I asked a floor trader source, his response to what Luis found out from the Asian powerhouse. Here's the trader's response, in his own words. What's your perspective?

 

"Yes, the Chinese sit on a years supply of corn.. 100+ million tons for food security and ag policy that controls corn imports and lets beans come in "freely". GMO corn is the concern, but GMO beans are ok. It's a farce to hold up rural incomes. Corn has consistently traded $10.00 a bushel. So, they have been flat on bean acres for 10 years and have expanded production of feed grain(corn). DDG and Sorghum imports have been a reaction to the program and high prices. And the gov't has been finding "legal" ways within the confines of WTO to curb the import of these competing grains..

 

The change in Chinese policy is to curb gov't reserves by disallowing imports and forcing domestic trade to participate in more aggressive gov't reserve auction.. the effect of more government reserve corn being offered is lower domestic prices now around $8.60... This is not cheap enough to compete with us for other origin exports... they did this in the early 2000's when they destocked leading up to WTO.. and they were a net exporter for a few years.. taking our South Korean business.. so its interesting but not a bearish factor for world markets per se.. it may top sorghums price premium to corn.. and could back up DDG prices a bit..
 
Corns concern for the moment is the too dry in NW Iowa.. Red river valley.. and too wet in eastern Corn Belt, losing acreage harvested and planted and yield potential, due to less nitorgen up take in the east. A sub-161 national corn yield could get you to 5 dollars. I think the market is fair here, using a 163-`164 national yield estimate."

 

Mike


 

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Advisor

Re: Thoughts On China

10$ corn yeah that's a little closer to reality. I would be ok with half that in the U.S. Like pulling teeth to get 10c are market is a joke.
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Veteran Advisor

Re: Thoughts On China

China is smarter than you think. They know how to keep their farmers/rural areas going. With a huge population base, they know they need farmers.........the u.s. havent a clue. We believe we can import everything.......whatever is the cheapest is the best......oh really ? You can get commodities from other places in the world cheaper.......lower cost of land, inputs, etc, etc......but do you want to eat it ? Look here in our country......people don't want GMO's.....I don't want to hear the story about how safe it is, and if it wasn't for them, we would really be hurting......we, as farmers should not defend this stance, but the seed companies,,,,but hey, they are smarter than us, they let is do their battle for them. The bottom line, if they don't want it, that is their right, and if we are not smart enouch to realize it, then maybe there is something wrong with us. back to the artifical high corn prices in china.....back in the dark ages, when I went to college, and had to lug around the stone tablets, and out run the dinosars.......we would told for every dollor spent in the rural economy, it returned over 8 times......not a bad rate of return ? imagine what our rural communities would be like if we had higher price supports for our grains....rather than see them die, as we are.....(i have to go over 22 miles now for gas, elevator only open durning harvest, same milage for grocerys),,,,not that long ago it was only 6 miles, and elevator open year round, could get feed, and basic hardware stuff. same on having a tire fixed, 22 miles, used to be 6 miles. and, as far as the grains going up impacting the cost of food........please. a well known company that buys alot of grain, does not hedge the grain market. I personally knew the head of their "procurement" department. he said the cost of the grains was less than 5% of their input cost on products, he said even if everything went up a couple dollars a bushel, would not have much of an impact, maybe we could learn a few lessons from china.......after all, don't all of us listen to our bankers ????? enough said
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Veteran Advisor

Re: Great post, elcheapo.

i figure India, ALSO is comin on Strong.

 

jeez, we're only talkin 3 billion folks ( both countries total ).

 

likely 300 million more folks added to the "middle class" income rate annually in the Pacific Basin ( maybe MORE 2 ).

 

 

 

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