USDA revises China's grain stocks upward

by Emily Wilson
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The U.S. Department of Agriculture stunned the grain industry in May by revising its estimates of China’s 2000-01 grain stocks upward by about 250%. The department’s data series for China also was revised upward significantly for each year beginning in 1978-79.

At 230.1 million tonnes, the new estimate of China’s wheat, coarse grains and rice ending stocks for 2000-01 was in sharp contrast to the April forecast of 66.1 million tonnes.

Explaining the revisions, the USDA cited new information from a range of sources, including China’s first agricultural census as well as statements by public officials and evidence from trade and price patterns.

Rather than a case of "look of what we found," the data represents an admission by the USDA of "look what we didn’t know." The department said its new estimates were more consistent with China’s mandated internal grain policy.

"China prefers to hold large grain stocks as insurance against catastrophic crop failures, regional imbalances or other disruptions that could constrict food supplies or force heightened reliance on imports," the department said.

USDA noted that its earlier estimates of China’s grain stocks were well below target levels mandated by that country’s internal grain policies, and well below total grain stocks estimates recently reported in the Chinese press.

Exporters of wheat and coarse grains in the U.S. reacted to the USDA report with both skepticism and caution. Some grain merchants said the USDA overestimated China’s holdings while others said the new estimates were at least more accurate than those previously made. Many questioned how much of these now apparently very large stocks were usable based on quality considerations and how much effect the new estimates would have on grain trade with China.

In an interview with World Grain’s sister publication, Milling & Baking News, Bruce N. Ritter, executive vice-president of Louis Dreyfus Corp., Wilton, Connecticut, U.S., said the USDA’s published numbers were overstated. "I think they (USDA) are wrong in representing as commercially available stocks that the market cannot utilize now or at any point in the future," he said. "We spend a lot of time on the ground in China, and we just don’t feel they are close to what the total available stocks are."

Ritter expressed continued confidence in the future for U.S. grain exports to China, notwithstanding the USDA changes. "Our view of where we are going has not changed," Ritter said. "We believe China will be a significant and consistent buyer of grains and oilseeds during the next few years. ... The long-term story is the same as it has been. Their economy is growing 7% to 8% per year. They have shown a willingness to join the W.T.O., a decision they made not just because they wanted to make us feel good. I think it will happen, probably late this year or early next."

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