High mold levels in new crop corn could drive strong wheat imports in coming year

Corn quality continues to be a major concern in China and this is causing wheat prices to rise as feed mills need to blend grains together to get toxin levels low enough for animal feeding.

Recent industry surveys are showing high percentages of corn tested positive for vomitoxins and mycotoxins in Shanxi, Jilin, and Liaoning. These toxins could lead to serious animal health issues if consumed.

Sample results from this year’s crop

Feed company Shandong Longchang conducted a survey in November this year, collecting over 250 corn samples across China.

Of those samples, 82% tested positive for zearalenone (ZEN), a mycotoxin, and 99% tested positive for vomitoxin. The ZEN level averaged 98.8 ug/kg in the survey which is below China’s regulatory limit of 500 ug/kg.

However, on vomitoxin, the average value from the survey was 1,082 ug/kg which exceeded China’s regulatory limit is only 1000 ug/kg.

The average level of vomitoxin in sampled crops in Shanxi (2,229 ug/kg), Anhui (1,259 ug/kg), Henan was (1,344 ug/kg), Jilin (1,004 ug/kg), and Liaoning (1,428 ug/kg) all surpassed the limit.

Additionally some of the maximum readings were concerning. The sample with the highest vomitoxin was from Hubei which flashed 5850 ug/kg, nearly six times higher than the acceptable limit.

Other research which studied the levels of vomitoxin in corn previous years had median values of 552 ug/kg in 2013, 383 ug/kg in 2014, and 738 ug/kg in 2015.

Complications for wheat

Corn with high toxin levels could drive wheat imports higher as corn can still be used in China but only if blended with high-quality grains until vomitoxin levels are cut to acceptable levels.

This creates complications for wheat as there is still a narrow price spread between corn and wheat, suggesting that wheat could serve as a cheaper substitute for corn in animal feed.

Because of this, feed mills are blending wheat with the lower quality corn. The consistent strong demand for wheat means that prices are likely to remain at the current high level, which may force state-owned companies to buy wheat from the international markets in an attempt to cool prices.

Warning signs

Back on December 6th, we flagged this risk in our daily commentary and said

Unfortunately, the weather is still causing trouble, the map below shows the temperature anomaly over the past 10 days. Much of China’s northeastern corn producing belt was anywhere from 2-6 degrees C (4-11 F) above average and these warmer temperatures could mean more potential for vomitoxins.

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