Money Market Guru — As per latest update from United States Department of Agriculture (USDA), Chinas MY2017/18 corn production is forecast to decline one percent from MY2016/17, although some recent industry planting surveys suggest that corn production could decline even more, especially in North East China.
Corn producers have several market-based and policy-driven incentives to switch to other grain and crops including wheat, rice, soybeans, sorghum, barley, silage corn, and fodder. Most corn producers who will switch to alternative crops consider rice to be the next best choice.
The minimum support price for rice declined in 2017 for the first time in nearly a decade. However, in relative terms, producer margins for rice remain strong. Unfortunately, given limited water resources only a small share of corn producers have access to adequate water supplies or will benefit from recent provincial irrigation projects. The vast majority of corn producers will plant dry land wheat MY2017/18 as domestic prices remain relatively strong. Smaller numbers of corn producers will switch planting to sorghum and barley where they are close to nearby markets with futures marketing contracts in place. Still other producers will opt to switch to planting soybeans, silage corn, or fodder. New land conservation programs will encourage a small share of Chinas corn producers to remove land from production. — Money Market Guru