Market expectations of crop size differ from official statistics

Earlier this week, the National Bureau of Statics released data that corn production rose by 1.7% y/y and soybean production rose 19.6% year on year. 

This was at odds with market expectations which saw corn production declining due to increased soybean planting, particularly in Heilongjiang, China’s largest corn and soybean producing province. 

Digging into this data is difficult because the statistics for crop-level data are only provided on a national basis. Province-level data is only provided on a combined basis for all grains and oilseeds. 

Nationally, the soybean area was up 17.4% or 1.76 million hectares while the corn area was only down by 0.6% or 254k hectares. 

As soybean production is primarily located in Heilongjiang, with about 37% of national production coming from the province in 2021, it can be assumed that most of this increase in soybean area happened there.

This increase in soybean area would have come at the expense of corn acres and Heilongjiang’s total sown area for all crops increased by just 0.9% year on year or 132k hectares. 

For the national corn area to fall by only 254k hectares, this means that other provinces would have to see an increase of 1.5 million hectares in corn planting. This is possible, but the last time that the national sown corn area increased by 1.5 million tons in a year was in 2013 and 2014 which was when the government was heavily involved in corn buying and input costs were lower. 

An important point here is that while farmers in Heilongjiang had a financial incentive to plant soybeans instead of corn, that doesn’t mean farmers in other provinces had a financial incentive to plant more corn to offset the corn area lost in a different province. 

While it’s overly simplified due to the lack of detailed data, if it’s assumed that the national corn yield is correct, and the increase in soybean area came at the expense of corn area, that would put national corn production closer to 270 million tons.

The market perception of crop size among domestic analysts is still divergent from the official data. Some domestic analysts have tried to resolve this difference, including by suggesting that private analysts were too focused on corn for grain purposes, while the official statistics include other areas of corn production which have seen growth, including silage and sweet corn for human consumption. 

The growth in production of these types of corn is unlikely to explain the large year-on-year increase in production alongside soybean production, and doesn’t factor into the balance sheet in the same way, leaving this an unsatisfying explanation for the gap in expectation compared to the official numbers. 

As the province-level crop-specific data for yield, production, and the area will not be out for some time, the market will instead be looking at futures spreads, basis, and market reports to gauge the size of the crop.