China: High corn prices spur record feed use of food grains

February 17, 2021 - With record corn imports forecast this month at 24.0 million tons for 2020/21, China’s demand for feedstuffs continues to rise as its swine herd recovers from African swine fever, according to USDA’s GAIN report.

High corn prices are supporting record feed use of wheat and rice. Although primarily consumed as food grains, feed use of these grains is rising with increased availability of old-crop wheat and rice from auctions at prices competitive to domestic corn.

China’s 2020/21 wheat nonfood use (feed and residual) is forecast at a record 30.0 million tons, more than 10 million higher than the previous year due to record auction volumes of domestic wheat and stronger compound feed production.

High domestic corn prices have helped to drive these record auction volumes, with more than 12 million tons reported as sold in January. Beginning in December, domestic wheat prices trended below corn for the first time in more than 6 years (based on the national monthly average spot price).

China wheat imports are raised for the sixth consecutive month to 10.0 million tons, the highest level in more than 25 years. Although most wheat imports are allocated towards human consumption, their relatively low import prices compared to China’s domestic corn prices make wheat attractive for feed use in China’s southern region. France has been the largest supplier for the first half of 2020/21, with landed prices averaging $270/ton, more than $160/ton lower than domestic corn and $120/ton less than domestic wheat. This price spread continues to support stronger feed use of wheat and spur imports.

Though rice is not widely used in feed due to its higher price, some feed mills in China are also beginning to use it in feed rations. Recent high corn prices have narrowed the premium that rice typically holds. China has been auctioning older stocks of rice from state reserves at low prices, recently targeting auctions specifically for feed use. Rice must be crushed by a stateowned enterprise and mixed as an 85 percent rice and 15 percent wheat blend to ensure its use as feed. This rice-based feed is likely used for poultry, given narrowing margins in that sector.

Rice consumption is raised by 1.5 million tons this month with much of the additional demand attributed to feed. Demand for low-priced rice has also spurred higher imports in recent months, especially from Burma and Pakistan.

Additionally, China has begun to import broken rice from India for the first time in decades, reportedly to be used for feed. With China’s domestic feed use rising, especially for older rice from the reserves, exports that would otherwise go to price-sensitive markets are expected to decline.

Expanded use of wheat and rice as feed ingredients is expected as a short-term solution to current strong demand but is not expected to persist in the long-term. This present situation is only viable if wheat and rice are released into the market in large enough quantities and at significant price discounts to corn. As old-crop stocks are drawn down, the use of these two grains for feed will likely diminish.