China's corn inventory to remain high, says USDA

China's corn inventory will stay at a high level for a long time with the abundant supply expected to keep downward pressure on the price in the foreseeable future, an economist with the United States Department of Agriculture said on Saturday.

Fredrick Gale, an economist with the USDA Economic Research Service, said in a panel speech at the 2016 China Agricultural Outlook conference that China's corn stockpile will continue to increase this year despite intensified efforts by authorities to reduce the stocks.

"Our projections show that even after this year, there will be an increase in corn inventory in China," he said, adding that the USDA expects that China's corn inventory will peak in the 2017/18 market year.

China's corn stockpile has already reached a historic high of 200 million metric tons in April, the amount the country can consume in one year.

The State Administration of Grain announced last month that it will phase out its corn stockpiling scheme and allow markets to set prices for the grain, as part of an effort to narrow a gap between local and international prices and to reduce the corn stockpile.

The government will instead provide subsidies to the corn farmers directly.

The Ministry of Agriculture also said in November that it will reduce the corn acreage in 13 provincial areas in North, Northwest and Southwest China to help reduce the crop area.

Gale said China's corn inventory has become so high that it is difficult for the market to absorb it in a short time, adding that the USDA's estimate on China's corn consumption is lower than the estimates of China's agricultural ministry.

Gale said that the downward pressure for corn will be bad news for the farmers, but will benefit the feed companies and the pork and livestock industry.

Robert Johansson, chief economist with the USDA, said in an interview that there will be more farmers in the US who are expected to grow corn this year, and he expects the corn prices to come down this year as a result of the increased supply.

Johansson said the USDA expects the demand for feed grains and soybeans, and the livestock market in China will remain strong, and that could help continue to drive the imports of corn substitutes, such as sorghum barley and DDGs, from the US.

"We hope we can continue to sell products to feed sectors in China as long as our prices are competitive in the market," he said.