I’m compelled to dust off the blog this evening after my longest break yet, hopefully I can still remember the login passwords. I have not been tempted lately to make updates, and honestly, I’m not all that motivated at the moment either, but I’m doing it out of duty. The urgent call I feel arises out of spending a few days attempting to gather information on events which my common sense tells me are quite significant to the grain markets, and yet have gone completely absent from the early-week wire reports and agricultural-market advisory notes. These events relate to the extent of damage to the Chinese corn crop from this week’s massive floods.
The effort to gather information on these events has not been helped by the fact that, in the immediate aftermath of the floods, the Chinese government imposed an effective news blackout. According to Bloomberg news, the government “instructed the operators of mobile and online news services to dismantle ‘current-affairs news’ operations on Friday…The sweeping ban gives authorities near-absolute control over online news and political discourse.” The Financial Times directly linked the media crackdown to coverage of the floods.
Sometime around July 21, an enormous and largely unanticipated storm brought devastating quantities of rain to a very large section of northeastern China. The rains were concentrated on one of the world’s most important regions for corn production, the agricultural provinces surrounding Beijing. The hardest hit province was Hebei, which accounts for 9% of Chinese corn production, and Henan, which accounts for another 7%. Reference to the map below suggests that within these two provinces, there is no reason to think of flooding as in any way localized. The footprint of the most intense rain covers nearly the entirety of both provinces. The precip maps also suggest that large corn-producing areas in Shandong, Liaoning and Shangxi provinces may also be suffering less severe flooding. These two provinces respectively account for another 11% ,7%, and 4% of Chinese corn production. Comparison of the maps leads me to estimate that approximately 20% of the Chinese crop is now threatened by these floods. China is one of the world’s leading corn producers at around 10 billion bushels per year, leading to an estimate of 2 billion bushels of production area under threat. What is uncertain is the fraction of the crop loss in those areas. Note harvest should have been well under way in these areas within the next 6 weeks.
The rain over the weekend is largely off the scale of the 1-week accumulation NOAA maps, so I’ve turned to the 15-day maps. Almost all of Hebei, and about half of Henan, Shandong, and Liaoning look to have received approximately 7 inches of rain or more. A very big portion of countryside, centered on the corn production area along the borders of Hebei, Henan and Shangxi provinces appears to have received around 13 inches.
Note that the size of Hebei province is 20% larger than the state of Iowa. The extent of damage will likely depend on how quickly the rains can drain off and the soils can dry. With such a huge section of the country receiving so much rain, it seems unlikely that the areas will dry quickly. My correspondent Crowbar informs that major river on the China High Plain, the Yellow River, is leveed and raised decreasing the effectiveness of that channel for the water to reach the sea. NOAA is forecasting another 1-3 inches for the hardest-hit areas over the next week, and another 2 inches for the week following.