Farms.com Home   News

Economist Says China Has Large Stocks Of Everything

One could summarize the current focus of grain markets with three phrases: low prices, large crops, and growing inventories.

This has been especially true given strong U.S. corn, soybean, and wheat yields in 2016. Several reports of large piles of grain around the country and world, especially in China, have further captured this reality.

It's interesting to look at China's corn, soybean, and wheat global grain inventories and its share of the market.

GLOBAL GRAIN INVENTORIES

When thinking about global grain inventories, it's important to keep in mind the relative size of ending stocks. In figure 1 global ending stocks are reported as a share of total use (or consumption) for corn, soybeans, and wheat since 1960.

Global corn stocks have recently climbed to more than 20% of usage. For marketing years 2003/2004 to 2013/2014 corn inventories were below 20% and hit a low of 14% in 2010/2011. While current corn inventories are higher than recent years, it's worth nothing they are considerably lower than levels in the 1990s when levels were regularly between 25% and 30%.

From a historical standpoint, the global inventory situation in wheat is more burdensome. Currently, global ending stocks are approaching 35%. Only 12 years - out of the past 56 - have experienced larger wheat inventories. It's worth noting that just a few years ago - 2007/2008 marketing year - wheat inventories were at their lowest levels in 56 years. Things changed fast, indeed!

Conditions are a bit different - and arguably more optimistic - in soybeans. During the 1980s and 1990s, soybean ending stocks typically ran between 15% and 20%. Since 2005, ending stocks have traded at a higher range, between 20% and 25%. Recently, soybean stocks have trended lower. So, while soybean stocks are higher than levels in the 1990s, current levels are not at a decade (or longer) highs as they are with corn and wheat.

CHINA'S STOCKS

Commentary about global grain stocks inevitably leads to a mention about China's large piles of grain. Since around 2005, China has accounted for a large share of global stocks.

In corn, for instance, China's ending stocks increased from 28% of global stocks in 2004/2005 to more than 50% in recent years. China currently accounts for 45% of global wheat stocks and nearly 20% of soybeans.

China is often thought of as a primary consumer of grain, not an exporting nation. While China could allow for export of grain inventories at any time, it's worth a few minutes to think about China as not exporting grain. By doing this, ending stocks look a bit different.
Ending stocks as a share of usage is shown for the World less China is shown. Overall, a generally tighter ending stock situation emerges. In wheat, inventories have trended lower in recent years. Corn inventories have trended higher, but remain mostly flat at around 10%. Soybean ending stocks have trended lower since 2006/2007.

When thinking about grain inventories and global ending stocks, a couple considerations are important. First, wheat and corn ending stocks, as a share of usage, have increased to decade highs. For corn, levels are still considerably lower than levels in the 1990s. For both corn and wheat, global grain inventories are currently well below the levels of the 1980s; comfort can be taken in that.

Click here to see more...

Trending Video

Predicting Weather with the Farmer’s Almanac

Video: Predicting Weather with the Farmer’s Almanac


The Farmers’ Almanac and Old Farmer’s Almanac have been around for centuries. The two journals use secret formulas using climatology, solar science and meteorology to make long-range weather forecasts. For years those working agriculture have turned to the almanacs for answers for insight into upcoming weather conditions.

“Over the decades, centuries even, farmers have put their trust into the almanacs products with their forecasts being one of them,” Steve Hu, professor in the School of Natural Resources department of earth and atmospheric sciences at the University of Nebraska-Lincoln, said during the Dec. 13 episode of Seed Speaks. “At least 50 years ago, (these) might have been the only forecasts available to people who wanted to use some information to make a plan or something.”

Modern weather forecasting with technology has only been developed over the past several decades, including the statistical approaches to the seasonal forecasting, Ray Schmitt, president and founder of Salient Predictions, added during the episode.

“With all of the satellite systems we have to monitor the weather, as well as buoys that are monitoring the state of the ocean, there is quite a bit of information now available with a long enough record for us to build comprehensive statistical models,” Schmitt explained.

However, building that trust in these “modern” weather forecasts isn’t easy, which is why many in the agricultural communities continue fall back on the almanacs for weather information even though there are more forecasts available made with more current knowledge of seasonal forecasting.

“Farming communities are still using the Farmers’ Almanac because they have the trust there. The federal government, NOAA the federal agency to issue official weather forecasts, they haven't done enough to build trust among farmers for their predictions,” Hu says. “You have to somehow encourage farmers to put more attention on NOAA’s seasonal predictions and less attention on (almanac) forecasts.”

The wealth of weather data and forecasts available now also give people options of what weather forecast they want to follow or the option to use multiple forecasts. Hu cautions though that this can lead to people favouring the forecast that aligns with their desired goal lor outcome.

“Farmers have to make lots of decisions about ‘Well, what am I going to plant next season? When should I harvest my crop?’ Lots of decisions have to be made and you'd like some help with making those decisions. So, people will look to any sort of guidance,” Schmitt added.

Using new forecast options or platforms for weather forecasts also requires that people learn how to use these new sources, Hu said.