At the end of 2017,
China’s grain farmers look back at a year of severe growing rice overcapacity,
easing corn overcapacity, and huge wheat reserves. In 2018, rice farmers will
face fierce competition, while corn producers can hope for recovering prices and
wheat farmers see the minimum purchase price cut.
CCM
analyses the market situation of all three major crops in China and gives an
outlook for the development in 2018.
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China hybrid rice
market
China’s
farmers have produced almost the same amount of hybrid rice in 2017 as it was
the case in 2016. While the yield per hectare went down slightly the area of
farming has been increased, which balanced out the loss significantly. The main
reasons for the smaller yield per hectare outcome can be found in flood
occurrences of China’s major rice planting area Hunan and the unexpected
appearance of devastating diseases especially targeting the three-line late
rice. Especially the occurrences of blast, false smut, sheath blight, bacterial
diseases, plant hoppers, leaf rollers, and borers have damaged the crop
during the middle and late growth stage.
However,
the yield disappointment of some farmers does not change the fact, that China
will continue to suffer from severe hybrid rice overcapacity in 2018, which is
estimated to be around 120 million kg. The number comes from a hybrid rice seed
supply of about 380 million kg facing a significant lower combination of
domestic demand and export by 260 million kg, according to market intelligence
firm CCM.
As
a result, it is to expect in China that hybrid rice will face a fierce
competition and lower prices to gain some market share.
What’s
more, the planting area of conventional rice has grown to more than 121
thousand ha in 2017, strengthening the tendency that conventional rice seeds
are to take over the market of hybrid rice in China.
China hybrid corn
market
As
opposed to the hybrid rice seeds market situation in China, hybrid corn seeds
have witnessed a significant drop in 2017, leading to a release of the
overcapacity of hybrid corn seeds in the coming year.
According
to CCM’s research, the planting area of hybrid corn decreased by more than one
quarter, which leaves the actual planting area to the scale of about 15 years
ago. The output fell alongside the smaller planting area. The downsize
measurements are part of the corn planting structure reform promoted by the
Chinese government to ease the high pressure from the high inventories
established in previous years.
Furthermore,
besides the decrease in planting area, another reason of the corn seed output
decrease in north-western regions of China were scorching weathers, diseases
and pests. Extensive and long-lasting scorching weathers during the pollinating
period and diseases and pests such as aphids, mites, and corn rust during the
late pollinating period have affected corn bearing and grouting.
New
corn seed varieties are gaining attention in the middle kingdom, promoted for
use in food and feed, while most of the inventory corn is facing bad quality
and hence sold for non-agricultural use like energy and fuel processing.
The
price of corn in China stopped falling amid the reduced supply. With an
estimated corn demand of about 1.1 billion kg in 2018, CCM predicts that China’s
corn seed market is about to recover and corn seed prices will increase again.
China’s wheat market
China
has recently announced to cut its minimum price for purchasing wheat in 2018,
aiming to ease the pressure on the huge reserves the country has built over the
last decades. The minimum price will drop by about 2.5% for the new year.
The
minimum purchase price for wheat ensures a steady income and security for
farmers, as the state buys the wheat when the market price falls below the
stated level. Th future of this program is uncertain, looking at the fact that
China already abandoned similar programs for cotton and corn I order to adjust
better to world market trade.
However,
even China has declined the minimum purchase prices of wheat, farmers are still
active in planting, so wheat areas won't be greatly affected in 2018, according
to CCM.
Affected
by tight wheat supply and the approaching Spring Festival in China, bran prices
recorded some rises, but poor-quality flour prices continued falling. It is
predicted that due to rising operating rate and weak demand, their prices will
both see fluctuations.
About CCM
CCM
is China’s market intelligence provider for the fields of Agriculture,
Chemicals, and Food & Feed.
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