China's Corn Supply Less Than Reported

China's domestic supply of corn appears to be quite a bit less than estimated, as local and regional farmers, apparently in an attempt to boost their status with the Chinese government appear to have overestimated the corn harvest in the country.

Both the Chinese government and the USDA said the country had produced a record crop of 191.8 million tons in 2011, but that appears to be anywhere from 6.8 million tons to 24 million tons less than the actual corn production numbers.

Domestic Chinese corn has already started to jump in price in response to government agencies and private producers bidding for the grain in the tighter-than-expected market.

Originally the USDA estimated China's corn imports at about 4 million tons, assuming the accuracy of the 191.8 million ton figure. That could, and probably will change significantly as the situation unfolds. Some estimate that corn production in China for 2011 may be as low as 168 million tons.

China has officially come out and said they have enough corn reserves and won't need to import a lot of corn for 2012, but that could be a negotiating ploy to keep corn prices somewhat stable as demand ramps up.

Even so, and with the drought pressuring corn supply in Brazil and Argentina, China can easily enough shift to importing wheat as a secondary choice if corn prices rise too high, waiting for an opportune time when the price pulls back. It'll be an interesting year for corn imports and exports around the world, including the United States.

China Corn Import Speculation Supporting Prices

Speculation that China may boost its corn imports from the United States has offered support to corn prices, even though other factors point to weakening conditions going forward.

For now though, corn futures for May delivery climbed to $6.485 a bushel, a gain of 0.7 percent.

As for China, the assumption is it will want to build up diminished inventory before the corn season in that country begins.

At this time it's less expensive for China to import corn from the United States than to use its domestic supply.

Drought conditions in crucial corn-producing areas of South America make the United States a probable choice for Chinese corn imports.

Are China's Corn Imports Short- or Long-Term?

For the first time in well over a decade, China has acquired large quantities of corn from U.S. farmers, importing close to 1.2 million metric tons.

Every time something like this happens, the media catches it and offer the possible narrative of a new age arriving for corn and other grain exports.

There will be only one way to find out, and that is time. China is close-mouthed about the circumstances surrounding the unusual actions they've taken, and part of that is for obvious competitive reasons, but also political ones.

Although China hasn't experienced near the extent of droughts Russia has in relationship to wheat, it has still had a number of them in the nation, which has apparently caused them to be short this year.

The other scenario is whether or not the Chinese population, which is growing wealthier, is increasing its demand for corn through its acquisition of meat.

One final element could be concern over the response of its people if they find out there is a shortage of corn. A couple of years ago riots broke out over higher food prices, and panics are easy to start if people begin to think they may not get food at all.

The official word from Beijing is the imports are based on higher domestic corn prices, adding the grain reserves in the country are enough for the people.

Hot, Dry China Weather Offering Corn Futures Support

The potential of low supply in the United States has corn prices pushing up, and add to that the hot, dry weather in China, and you have a couple of factors working together to offer corn prices support.

Although not proven yet, the perception that corn supplies will not be near as high as estimated has drawn traders to the market, and pushed up corn prices as a result.

For China, they could end up buying corn from the U.S. if the weather has indeed been as devastating on the corn crop in China as thought.

So for now, corn has entered into a bullish stage, at least until a firmer grip on supply is confirmed either way.

China Buying U.S. Corn

For the first time in three years China has reportedly said it will acquire corn from the U.S., and corn prices rose in response, increasing by 10 cents for the week.

Confirmation of the assertion China is buying U.S. corn has yet to be made, which says China has acquired 4 to 5 cargos of corn for June-July shipment.

If that's found to be true, it could offer some support for corn going forward.

Other important news in the corn market was the release of the corn planting progress report, which revealed 50 percent of the crop has been planted, and 7 percent so far has broken ground.