Chinese Wheat Production Down 10% “In A Best Case Scenario”

Nogger's blog reports that China's wheat stocks may be just another ponzi scheme. (thanks to Dave for pointing this out)

(emphasis mine) [my comment]

Wednesday, 18 February 2009
China's Wheat Stocks May Be Just Another Ponzi Scheme

Dow Jones is carrying a news report today that says
Chinese wheat production will be down 10% this year "in a best case scenario" going on to say that irrigation can only help 60-70% of the crop.

The story goes on to say that
China had 30 million tonnes of wheat stocks at the end of 2008.

Thirty million?
It was supposed to be sixty million a few weeks ago, I wouldn't like to use that store would you?

A smaller planted area for the coming season already lops around 5-6mmt of production off last season's output of 112.5mmt. Knock off another 10-12mmt in our "best case" scenario and we are looking at dipping into our comfort-zone by around 15-17mmt.

That's 45-47mmt of Chinese wheat disappeared off the table in a best case scenario! Nobody seems to be reporting what the worst case scenario might be. [I gave a shot at it

With further crop losses expected from reduced inputs, cold, pests and a serious outbreak of stripe rust a 20% crop loss would wipe out the entire Chinese buffer stocks completely. And that is if they are really there.

Just suppose that China's wheat stocks are really just another giant Ponzi scheme? They've always had plenty of buffer stocks, they've been building them for years. Everybody knows that, right? Without them to rely on, one bad crop year would turn into a disaster. Like with Bernie Madoff, you don't know there's a problem until you start to make withdrawals.

Suddenly sending out soldiers, armed police and militia to "help" with irrigation relief doesn't seem like such a strange move after all.

And if the wheat stocks aren't really there, what about corn & soybeans?

My reaction: So, are Chinese wheat stocks are really just another giant Ponzi scheme?

1) According to a Dow Jones report, wheat production will be down 10% this year "in a best case scenario"

2) The report also states China had 30 million tons of wheat stocks at the end of 2008

3) Chinese wheat reserves was supposed to be sixty million a few weeks ago

4) China is sending out soldiers, armed police and militia to "help" with irrigation relief.

5) Further crop losses are expected from reduced inputs, cold, pests and a serious outbreak of stripe rust

6) A 20% crop loss would completely wipe out the entire Chinese buffer stocks.


Conclusion: If you remember, two weeks ago I question whether
China's 60 million tons of wheat reserves actually existed? Well, now China's wheat reserves are 30 million tons. What happened?


On another note, below is the latest drought map from the US Drought Monitor. Doesn't seem like the picture is improving.

This entry was posted in China, Food_Crisis, News_Developments. Bookmark the permalink.

4 Responses to Chinese Wheat Production Down 10% “In A Best Case Scenario”

  1. Anonymous says:

    If you look at historical drought charts, this is not bad at all.

  2. Antistate says:

    Eric, I really enjoy your blog. I thought you might find this new piece of information interesting.
    http://www.nytimes.com/2009/02/21/us/21drought.html

  3. Anonymous says:

    How much do you eat a day?
    l lb pasta/day for 1.2 b ppl
    . . .

  4. Anonymous said...
    If you look at historical drought charts, this is not bad at all.

    Which historical charts are you looking at?

    ---------

    Antistate said...
    Eric, I really enjoy your blog. I thought you might find this new piece of information interesting.
    http://www.nytimes.com/2009/02/21/us/21drought.html

    Thanks, I saw that story, but I just didn't get around to blogging it.

    "In a blow to California farmers struggling with a persistent drought, federal authorities released projections on Friday showing that little or no water would be available from federal sources this year for agricultural use"

    ---------

    Anonymous said...
    How much do you eat a day?
    l lb pasta/day for 1.2 b ppl

    I am going to start loading up on some pasta myself

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