Predicting China’s Corn Acreage and Production in 2021/22 and 2022/23

By Xi He, Miguel Carriquiry, Wendong Zhang, and Dermot J. Hayes

China’s corn imports exceeded its corn tariff rate quota (TRQ) of 7.2 million metric tons (MMTs) in 2020 and reached a record of 26 MMTs in the 2020/21 marketing year (USDA 2021a). While China’s recent corn import surge was largely due to its feed demand to recover its hog inventory from the African Swine Fever (ASF) outbreak, the prospect for China’s corn imports is unclear. Figure 1 shows that China’s corn futures price with maturity in November 2021 declined from around $10.80 per bushel in May to $9.70 per bushel in September 2021. The current level is still high relative to the historical norm. Over this period, China’s hog futures price declined from the highest point of around $2 per pound to around $1 per pound. The hog futures price drop suggests that China’s hog inventory recovery is likely making good progress, which will put upward pressure on China’s corn imports in 2021/22 and 2022/23. The net impact will depend on China’s domestic corn production, and to estimate this we need reasonable estimates of Chinese farmers’ acreage and yield price supply elasticities.

We compiled a dataset that includes: (a) province-level planted acreage and yield of corn, soybeans, rice, and wheat; (b) province-level rainfall and temperature over the growing season; (c) national cash price and price volatility of the four major crops; and, (d) national price fertilizer price index from 1990 to 2019. Table 1 presents the province-level average planted acreage and the domestic prices of the four crops in 1990 and 2019. We follow Haile et al. (2016) to estimate China’s national corn and soybeans acreage price elasticities. We then use these elasticities and China’s futures prices for the four crops with maturity in November 2021 and July 2022 to predict China’s acreage and production of the four crops in 2021/22 and 2022/23.
 

Depending on whether we include rainfall and temperature as controls, corn acreage price elasticities range from 0.382 to 0.413, soybean acreage price elasticities range from 0.876 to 0.897, and corn acreage is negatively affected by corn volatility. Given that weather data in 2022 are not available, and crop yield will depend on the weather deviation from the normal trend, we use the coefficients without weather variables as controls to predict China’s crop acreage in 2021/22 and 2022/23.

Figure 2 presents China’s actual acreage of four crops from 1990 to 2020 and predicted acreage in 2021/22 and 2022/23 using the futures prices of the four crops with maturity in November 2021 and July 2022 as of September 10, 2021. We predict that China’s corn planted acreage will be 44.33 million hectares in 2021/22 and will decline to 42.5 million hectares in 2022/23. Historically high cash corn prices will drive the increase of corn acreage in 2021/22, and the corn acreage decline in 2022/23 is driven by the lower corn futures prices (as shown in figure 1). The increase of corn acreage in 2021/22 will partially come from land used for soybeans and wheat. Our predicted corn acreage in 2021/22 is slightly higher than the 42 million hectares predicted by the WASDE September report (USDA WASDE 2021).

Figure 3 presents China’s actual production of four crops from 1990 to 2020 and predicted production in 2021/22 and 2022/23 without weather variables as controls. We predict that China’s corn production will be 280 million tons in 2021/22 and decline to 269 million tons in 2022/23. Our predicted 2021/22 corn production is higher than the 273 million tons predicted by the WASDE September report (USDA WASDE 2021).

We use the predicted corn production and the assumption that China’s corn feed consumption to be used in swine feeding will increase by 10% in the next two years to predict China’s corn imports. We predict that China’s corn imports will be 23.4 MMT in 2021/22 and 34.9 in 2022/23. The large import increase in 2022/23 is partially caused by China’s lower predicted production in 2022/23.

As the time of writing, China has experienced heavy rain in its major corn-producing region in the north (Reuters 2021). Using the estimated corn harvested area and yield elasticity, with respect to rain and temperature, and the rainfall and temperature data as of September 2021, we predict that China’s 2021/22 corn production will decrease by 0.141%, which translates into 395,017 metric tons—around half of the 850,000 metric ton reduction predicted by China’s Ministry of Agriculture and Rural Affairs. The weather-induced corn production reduction would likely increase China’s corn imports in 2021/22.

References

Haile, M.G., M. Kalkuhl, and J.V. Braun. 2016. “Worldwide Acreage and Yield Response to International Price Change and Volatility: A Dynamic Panel Data Analysis for Wheat, Rice, Corn, and Soybeans.” American Journal of Agricultural Economics 98(1):172–190.

Reuters. 2021. “China Lowers 2021/22 Corn Output Estimate on Falling Yield due to Rain.” Reuters October 12, 2021.

US Department of Agriculture (USDA). 2021a. Production, Supply, and Distribution Datasets.

US Department of Agriculture (USDA). 2021b. World Agricultural Supply and Demand Estimates.

Footnotes

1. We estimated the elasticities for the four major crops separately and not in a joint system. ↩

2. The results on the estimated crop acreage supply elasticities are available upon request. ↩

3. We assume that China’s corn stock and net-exports in 2021/22 and 2022/23 remain the same as those in 2020/21 and 90% of corn feed consumption in 2020/21 was for swine feeding. ↩

Suggested citation:

He, X., M. Carriquiry, W. Zhang, and D. Hayes. 2021. "Predicting China’s Corn Acreage and Production in 2021/22 and 2022/23." Agricultural Policy Review, Fall 2021. Center for Agricultural and Rural Development, Iowa State University. Available at www.card.iastate.edu/ag_policy_review/article/?a=130.