Prediction and analysis of corn supply and demand after China's entry into WTO

Introduction: last week, the U.S Department of agriculture and the agricultural counsellor released their respective forecasts on China's corn situation in 2001 / 02 The comparison between USDA and agricultural counsellor for this year's supply and demand forecast is shown in the table below The USDA's view is more conservative because it has not been predicted that China will start importing corn in the new agricultural year, but some people believe that once China joins the world trade organization, China will import corn Next month, Qatar will hold a meeting to vote on China's accession to the world trade organization If the result is favorable, Chinese officials will return home and vote at home to join the world trade organization All of this will be as expected After that, the most important thing is when China will officially join the world trade organization, and for us, more importantly, in 2001 / 02 market year, in terms of export subsidies and imports, what kind of requirements China will face from the world trade organization The table below shows the difference between the USDA forecast and the agricultural counsellor forecast The table also lists the amount of corn that China may import at the tariff rate if prices and conditions permit in 2002 Table of corn supply and demand in China (million tons) comparison table of USDA and agricultural Counselor's forecast USDA Agricultural counselor 2001 / 02 2000 / 01 2000 / 01 2001 / 02 2001 / 02 difference carried into inventory 102.3 102.3 81.4 87.5 6.1 output 106.0 106.0 108.0 110.0 2.0 import 0.1 0.0.2 0.2 3.0 2.8 Total supply 208.4 208.5 189.6 200.5 10.9 domestic consumption 120.0 114.0 124.0 117.0 - 7.0 export 7.0 7.0 4.0 2.5 - 1.5 total consumption 127.0 121.0 128.0 119.5 - 8.5 carry over inventory 81.4 87.5 61.6 81.0 19.4 commitment of tariff rate (TRQ) import in 2002 wheat: 8.648 million tons corn: 5.85 million tons In the agricultural year from October 2000 to September 2001, the agricultural counsellor cut China's corn consumption by 6 million tons compared with the estimate in September This correction is significant because it indicates a reduction in usage, which has not been common in the supply and demand history of the past 15 years So what on earth caused the decrease of domestic corn consumption this month and broke the trend of increasing corn import in China in the past 15 years? This revision is also important for assessing inventory, as well as for judging China's interest in or pressure to continue exporting corn before entering the WTO The agricultural Counsellor's revision of the consumption showed that the output increased in 2001 (110 million tons, compared with 108 million tons predicted by the U.S Department of Agriculture), which showed that the carry over inventory in 2001 / 02 was 81 million tons, while that of the U.S Department of agriculture was only 61.6 million tons This difference is very important because the agricultural Counselor's revision will be carried over to the 2001 / 02 agricultural year, and the total domestic consumption is only 117 million tons, 7 million tons lower than the 124 million tons predicted by the U.S Department of agriculture Overall, the difference between the total consumption in 2000 / 01 and 2001 / 02 was 13 million tons The difference of consumption is reflected in the different forecasts of the carry over inventory made by the USDA and the agricultural counsellor respectively Looking back in May, the U.S Department of agriculture significantly revised the 20-year history of China's corn supply and demand balance Although the supply is the official estimate released by the Chinese government and the final data used by the agricultural counselor and the USDA, the consumption and inventory data are the closest estimates that the USDA and the USDA think they can make The total difference in inventory for 2001 / 02 was 19.4 million tons, or 32% higher than the USDA forecast If China's corn stocks are really as high as the agricultural counsellor predicted, why is the price of domestic corn higher than the FOB price by $30 to $40 per ton? The more interesting difference is that in the column of "differences" in the above table, the differences in trade forecasts are very large As far as the USDA and others are concerned, the most difficult prediction to make is to forecast China's trade volume in addition to the U.S corn yield This has been especially true in recent years, as China's inventory has been in the process of adjustment, and China has provided a large number of export subsidies to two major domestic corn exporters to sell Chinese corn to the world market The agricultural counsellor predicted that China would import 2.8 million tons of corn in 2001 / 02, while the U.S Department of agriculture predicted that only 200000 tons would be imported (and that's the amount that has been purchased from the United States) The agricultural counsellor predicted that China would export 2.5 million tons of corn in 2001 / 02, compared with the U.S Department of agriculture's forecast of 4 million tons in 2001 / 02 and 7 million tons in 2000 / 01 China has reportedly sold 3.5 million tons of new corn, and later bought back half a million of them These sales include subsidies of around $1 per bushel, which indicates a lot of pressure on corn exports This pressure may be political or related to concerns about pre harvest storage capacity For whatever reason, it seems that China is unlikely to export 3 million tons to 3.5 million tons of corn by means of large export subsidies from October 2001 to February 2002, which can only be reversed from January to September 2002 2.8 million tons of corn can be imported according to the market price including the shipping cost of transportation That's why different predictions about China are so important The agricultural Counsellor's forecast shows that the world corn trade will change dramatically from January 2002 to September 2002 The change in the volume of world trade is equivalent to 4.3 million tons (2.8 million tons of additional imports and 1.5 million tons of reduced exports) This change is likely to have the biggest impact on U.S exports, as the net effect is equivalent to an increase in U.S exports of about 175 million bushels in 2001 / 02 Equally important, the agricultural Counsellor's forecast shows that China will become a net importer in 2001 / 02 and is likely to last into 2002 / 03 and beyond What does this mean for American agriculture? First of all, this difference shows the difference in predicting China's actions next year The agricultural counsellor believes that China will abide by the commitments of WTO, and take the impact of these commitments into account when forecasting the corn supply and demand table in 2001 / 02 Secondly, this shows that for American farmers, it will have a huge impact on corn export and the dominant position of the United States in the international corn export market Finally, this shows that the current market price indicates that the market does not think the agricultural Counsellor's forecast is correct Current market prices are not competitive at all in most parts of the corn belt in the United States relative to soybeans Farm corn prices of $1.70 to $1.80 per bushel will not allow many farmers to switch from soybeans to corn in 2002 As the details of China's WTO commitments emerge, and how and when China will implement them, the market price structure of corn may change If the U.S agriculture counsellor and agricultural counsellor are similarly optimistic about the future market, then it is likely to require American farmers to increase the corn planting area in 2002, so they are required to provide higher economic returns to those farmers who convert from soybean planting to corn planting.