Nov. 28, 2016 1:59 a.m. ET
China’s crop of agricultural data is growing, but the influential commodities player continues to face a stubborn problem: lack of trust in the data’s reliability.
In its latest effort to make more clear what is going on in its agricultural sector, the Chinese government has begun releasing estimates and forecasts on the production and consumption of five agricultural commodities. But Beijing’s numbers differ from those of the U.S. Department of Agriculture, widely seen as the standard-bearer of agricultural data.
For example, China is less optimistic than the USDA about the amount of corn it will consume in 2016-17: Its forecast is 7% lower than the U.S. estimate, while its forecast for how much corn it will import is a third of the U.S. estimate for the same period. China has such a large stock pile of corn that the markets are carefully watching to see how long it will take to reduce this.
China’s official data is “so out of whack,” said Jim Huang, chief executive officer at China-America Commodities Data Analytics Inc., which provides private data and analysis on China’s agricultural sector. Chinese hog numbers might be 20% lower than the country’s official data showed, he said, pointing to U.S. data suggesting that China didn’t import or produce enough feed for that many animals.
Detailed data on how much China, one of the world’s largest consumers, can produce and how much it will have to buy from offshore markets affects global agricultural-commodity prices. And with China’s role as an agricultural importer increasing, the need for accurate data has become an even more pressing issue for global markets.
Meanwhile, the government still doesn’t release numbers on some key areas of China’s agricultural sector, such as on the size of its mountainous stockpiles of corn and soybeans. And it provides little data on its wheat and rice crops, which it continues to support to help it maintain food security.
“World markets can be caught flat-footed if they don’t know what is going on in China,” said Fred Gale, a senior China economist at the U.S. Department of Agriculture.
China’s newest data series, modeled on the widely respected U.S.-produced World Agricultural Demand and Supply Estimates, covers most of the main globally traded agricultural commodities—soybeans, corn, cotton, vegetable oil and sugar—and provides consumption, production, and import and export figures for the prior, current and coming year. Beijing introduced it in July.
Most analysts continue to use the USDA’s data as their starting point for devising the outlook for China’s agricultural sector. The USDA data, which covers global markets, is seen to be largely unbiased and has proved itself reliable for several decades.
“Many in the industry have gotten much more comfortable with the Chinese data in the past few years,” although people continue to watch closely both the USDA and China data, said Greg Adamsick, a director at RCM Alternatives, a Chicago-based firm that specializes in managed-future products.
Many analysts use proprietary programs to estimate the situation in China. Mr. Adamsick said he is working on his own, which uses artificial intelligence to analyze data from multiple sources to come up with forecasts and estimates.
“The more data I can get, the better,” Mr. Adamsick said.
China’s Ministry of Agriculture and its National Development and Reform Commission didn’t respond to requests to comment on the accuracy of estimates.
Some market watchers express concern that China’s data may be subject to political massaging in a country where the government takes a firm hand in directing the economy, even as it is introducing more market forces into the agricultural sector. China’s data forecasting a fall in sugar imports in 2016-2017, for example, coincides with increased complaints this year from the domestic sugar industry about the impact on the sector of cheap imported sugar.
For a decade, Beijing heavily subsidized the agricultural sector: It bought up crops to ensure farmers received at least a set amount for their goods, building up huge government stockpiles of commodities such as corn and rapeseed oil.
‘World markets can be caught flat-footed if they don’t know what is going on in China.’
But in the past few years, China has gradually been scrapping the minimum-price guarantees, resulting in farmers’ growing other crops and the government’s selling some of its stockpiles. The sale of stockpiles helps make up the shortfall caused by crop reductions and reduces the reserves. A decision to sell even a portion of the reserves can hurt prices around the globe as it reduces China’s demand for other products.
Palm-oil prices offer an example: Analysts forecast that it would trade above 3,000 ringgit (about $675) a ton for most of 2016. But a decision by China to sell reserves of rapeseed oil, an alternative to palm oil, capped prices, analysts say.
This underscores why market watchers are so eager for China to offer more data on its stockpiles.
The lack of confidence in what is known about the size of these stockpiles “creates much uncertainty and volatility in global markets,” said Aurelia Britsch, head of commodities research at BMI Research in Singapore. “The condition of their release—including the price, pace and volume proposed by authorities—is currently one of the most important drivers of prices such as corn and cotton.”
For Ms. Britsch, like many in the market, it is now a matter of waiting to see how the Chinese data tracks and whether the story it tells over time can be believed.
Write to Lucy Craymer at Lucy.Craymer@wsj.com
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