China harvested its 7th largest corn crop in eight years, but it falls well below domestic demand.

China harvested its 7^th largest corn crop in eight years, but it falls well below domestic demand.

Despite China harvesting its seventh record corn crop in eight years, China has struggled to meet the insatiable demands of its middle class. Corn which forms the basis of sweeteners, starch, alcohol, ethanol  and feed for livestock, has become a vital commodity to the China market.

Chinese corn production reached 189.2 million tonnes in the harvest that began in September, 6.7 % more than last year, according to a survey of growers in the seven main producing regions carried out by SGS SA.

According the USDA, Chinese demand rose 50% since 2000 but output only gained 38%,which is insufficient to meet the demand and is driving prices to the highest ever annual average. The explosive economic growth in China in the past decade has spurred a change in diets, China’s  dairy herd has almost tripled since 2000, and per capita pork consumption rose 26 %.

China already buys about a quarter of all U.S. soybeans and  has become a net importer of corn for the first time in 14 years in 2010. In July, China ordered 21 million bushels of U.S. corn in one order, which is more than the U.S. government thought China would purchase annually . The purchase took the market by surprise and then China bought another 2.2 million bushels of U.S.

Prices in Jilin China rose 17 %  and touched a record 2,43 yuan a tonne on September 19, according to Shanghai JC Intelligence, the mainland's biggest independent agricultural researcher. Only US farmers grow more corn and the US consumers consume more corn than China.

Since China is secretive about the levels of commodities it holds in its strategic reserves, the rest of the market can only guess what its supply needs are, but the USDA forecasts that China will import 79 million bushels of corn for the 2011-2012 crop year. Some grain traders are even more optimistic, but they have been wrong before about China's appetite for U.S. corn, In the mid 1990’s US farmers thought the Chinese would become annual buyers, though  China's middle class is much larger than in the 1990s , maybe we are entering a golden age of Chinese consumption.