February 24, 2003

Recent changes in government policy have reduced overall Chinese grain production by nearly 50 million tons or more than 10% which, combined with below-cost corn exports, means that the government has been able to begin cutting huge stocks built up in the late 1990s, according to USDA.

Since the Chinese government publishes no numbers on consumption and stocks, it is difficult to say for sure, but it appears that grain stocks are declining only slowly, according to this report, because of very anemic, if not declining consumption of wheat and rice for food.

The large stocks also should keep imports at minimal levels except for malting barley needed for a growing beer industry.

Despite weak food demand, Chinese feed demand is growing steadily. If it does not already, grain consumption in China should exceed current market-driven levels of production. In the long run this means that China could very well once again become a net grain importer.

However this will have to wait until stocks are reduced to reasonable levels. Although this will probably not happen over the next year, it is difficult to say how soon it will happen, particularly given the lack of published government statistics on the Chinese market, the report said.

The entire report is on the Internet at http://www.fas.usda.gov/gainfiles/200302/145884736.pdf.