China’s knack for inaccuracy in estimates for domestic crops may have struck again in its wheat production forecast, with US staff restating their belief of a harvest 10m tons below the official figure.

US Department of Agriculture bureau in Beijing stuck by an estimate for China’s 2012 wheat harvest of 108m tons – below the estimate from the CNGOIC think tank of a 118m-tonne crop.

The bureau’s figure comes despite a decision by USDA officials in Washington to go with the CNGOIC estimate, themselves estimating the crop at 118m tons.

However, the bureau, which warned in August of disease damage to crops far greater than that reflected in Chinese data, flagged the role of rising prices in adding support to its assessment.

‘Projection is too high’

The bureau said: “From July to September 2012, the average wheat price rose approximately 7%.

For October, major wheat producing provincial wheat prices, in Hebei, Shandong, and Henan, are even higher at 2,280 remninbi per tonne.

“The official Chinese projection is too high… If Chinese wheat production is as high as Chinese authorities estimate, it is unclear why wheat prices are rising, especially if expectations are that more feed mills may switch to less expensive corn.”

The bureau did not dispute ideas of a record Chinese corn crop, pegging it at 198m tons, undermining prices which have made the grain “more competitive than wheat” in feed.

Grain prices are widely used as an indication of the veracity of Chinese harvest data, which are often seen as being exaggerated by a subsidy system which rewards local authorities by production.

In 2010, for instance, a continuing rise in corn prices to a record high was seen as evidence that the harvest was nowhere near as large as the record crop that official figures suggested.

‘New crop can still be utilized’

The poor quality, besides quantity, of this year’s Chinese wheat crop has already raised concerns, given the levels of disease, notably the fusarium fungus, believed to have undermined the crop.

“Industry contacts believe that some distributors and middlemen may be mixing 2012-13 fusarium-affected wheat with fungus-free wheat, so that the new crop can still be utilized,” the bureau said.

While such practice is common, within safety margins, “if toxin levels are too high, this could negatively affect livestock health and production”.

Some commentators, such as Rabobank, have also cautioned over a boost to world prices if China is forced to turn to imports in greater quantity than expected, as appears likely.

While the USDA bureau kept its estimate for China’s wheat imports in 2012-13 unchanged at 1.5m tons, customs data show the figure topping 1.0m tons within the first three months of the marketing year.

Source: Agrimoney Nov 2012

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