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Flooding Continues to Impact Crops in China
Excessive summer rainfall in central and southern China has led to serious flooding in the Yangtze River Valley. Water levels in lakes and rivers are still at flood stage, but dry weather has returned to the lower Yangtze River Valley, allowing some repairs and replanting to occur. Continued rainfall in the upper reaches of the Yangtze River is expected to bring more flood water through the affected areas downstream and pose a threat to the weakened dikes. In the Northeast, unseasonably heavy rainfall in early August caused heavy flooding and some crop losses in Heilongjiang and adjacent provinces.
National and local officials are still evaluating the agricultural and economic damage from the 1998 flood season. Meteorologists have hypothesized that the weather phenomenon of "La Nina" has contributed to the unusually wet weather pattern this summer in China, though there is widespread recognition by Chinese officials and environmentalists that man-made factors have been partly responsible for the severity of the damage. These factors include deforestation, excessive cultivation on steep slopes, reclamation of bottomland around lakes and rivers, and disruption of land cover from mining and other economic activities.
The U.S. agricultural counselor in Beijing recently returned from a visit to Henan and Hunan Provinces to evaluate the impact of the flooding on agricultural production and trade. According to local officials and other sources, total cotton production could be down 5 to 10 percent from last year, while rice production may be down by as much as 10 percent. However, lower production in 1998 may have only a limited impact on China's net trade because existing stocks of both crops are very high. Staff from the U.S. Agricultural Affairs Office are planning several additional trips in September and October throughout China to gather more information on the crop situation.
The crops most affected this year by the flooding are rice and cotton in the Yangtze River Valley and soybeans and corn in the Northeast. Flooding has reportedly damaged stocks of cotton and undoubtedly damaged infrastructure to transport cotton stocks. China's decision in April 1998 to reenter the world cotton market as a major exporter may be impacted by the floods. If it reverses its decision to export, such a decision would decrease available supplies and competition on the world market. Since China may hold 40 percent of the world's stocks, its policy with regard to exports and imports is a key to the assessment of flood impact. At this time, it appears that the flooding has had minimal impact on China's rice trade situation. The heavy rains have been blamed for shipment delays during the past several months, but contracts have continued to be executed with no reports of defaults. The amount of stored grain destroyed by flooding is believed to be small.
The Worst May Be Over ...
Rainfall has diminished in most of southern and central China since the first week of August, allowing vital rescue and repair work to begin. Officials are relived that dikes protecting major cities along the Yangtze River have been able to hold back the flood crests, but protection of the urban centers has come at a very high cost to rural residents and agricultural production. Preliminary reports say several thousand lives were lost, millions of people were evacuated from their homes, and economic losses have been estimated at more than US $24 billion. Officials in China emphasize that a complete accounting of the flood's impact will not be possible for several months. Another dangerous flood crest, which originated upstream in Sichuan Province, is now passing through the middle section of the Yangtze River. Flood waters in the Yangtze are not expected to completely recede until the end of October.
As the situation gradually stabilizes in central China, the focus shifts to flooding in Northeast China, particularly Heilongjiang Province, China's most important soybean province and a major producer of corn and single-crop rice. A short, intense rain event resulted in 3 to 6 inches of rain falling over a wide area of western Heilongjiang, Jilin, Liaoning, and eastern Inner Mongolia during the first week of August. The runoff sent the Nen and Songhua Rivers over their banks, inundating a reported 3.12 million hectares of farmland in the province. Although Harbin, the capital, was untouched by flooding, more than a million homes in Heilongjiang Province were reported destroyed, millions of people were displaced, and China's largest oilfield in Daqing was threatened with closure. A local official stated that nearly 2.3 million hectares, or nearly 25 percent of Heilongjiang's total crop area, would suffer total failure. Some traders and analysts are forecasting a significant reduction in soybean production this year due to flooding in the western part of the province and earlier drought in eastern areas. The impact on the corn crop, grown extensively throughout the province, is not expected to be large. Higher estimated corn yields due to abundant rainfall in North China will help offset flood losses near the rivers.
Rice Crops Most Affected By Flooding ...
In August, China's 1998/99 rice crop was estimated by USDA at 138.0 million tons (milled basis), down 2.0 million or 1 percent from last year due to reduced area and yield. Output of early rice (23 percent of total output in 1996) is reported to be lower this year in Hubei, Hunan, Guangxi, and Jiangxi Provinces due primarily to wet weather during the June/July harvest period. Late rice (27 percent of total output) was transplanted in July, but reduced area and planting delays are expected due to the widespread flooding, which hindered farm work. Late-rice yields will largely be determined by the weather in August and September. Single-crop rice (50 percent of total output) is grown in Northeast China, the North China Plain, Sichuan, and parts of Jiangsu and Hubei outside the flooded areas. The weather for single-crop rice has been wetter than normal in most areas, but temperatures have been moderate and good yields are expected. The U.S. agricultural counselor in Beijing reports that private and Chinese Government sources put the total rice crop down by as much as 12.5 million tons from last year's record output of 140.5 million tons (milled basis). This would be close to10 percent of China's total rice output and 4 percent of China's total grain production in 1997.
At this time, it appears that the flooding has had minimal impact on China's rice trade situation. China is expected to remain a net exporter in 1998 and 1999, exporting lower quality rice, and importing about half a million tons annually of fragrant and other high quality rice. In August, USDA lowered the 1998 calendar year export forecast for China by 250,000 tons (to 2.25 million tons) due to concerns that the flooding will slow shipments. The heavy rains have been blamed for shipment delays during the past several months, but contracts have continued to be executed with no reports of defaults. Exports in 1999 are expected to fall to 1.5 million tons due to lower world demand. To date, the flooding has had no effect on the 1999 export estimate. A modest decline in production is not likely to have a major impact on China's trade situation, as China has had bumper rice crops for the past two years, and has built a very large stockpile. Only a small amount of stored grain was believed lost due to the flooding. In the event that China would need to curtail exports or import larger quantities in 1999, plentiful exportable supplies are expected to be available from most of the other major exporters.
Losses to Cotton Crop May Affect Trade ...
China's 1998/99 cotton production is currently estimated by USDA at 19.5 million bales, down 8 percent from last year because of reduced yield expectations. Trade estimates of China's cotton production in 1998 range from 18.4 million to 20.2 million bales, while China's Cotton and Jute Corporation has estimated the crop at 17.0 million to 17.45 million bales. Production in Hubei Province is expected to drop by an estimated 460,000 bales from last year, while officials in Hunan Province say production may be down 230,000 bales.
Cotton yield is forecast down from last year's record due to unfavorable weather during flowering and pollination. Excessive rainfall caused yield reductions in Hunan, Hubei, Jiangxi, and Anhui Provinces. These four provinces account for approximately 25 percent of total cotton production; however, flooding was not provincial-wide meaning that a much smaller percentage of China's total crop was impacted. The hot, wet weather in July and early August also created suitable conditions for diseases and pests, though officials have not seen any evidence of widespread bollworm or disease damage. Growing conditions for cotton this year have been generally favorable in Xinjiang Province and the North China Plain. The current hot and relatively dry weather in central China also will benefit cotton, now in the open-boll stage.
Flooding has reportedly damaged stocks of cotton and undoubtedly damaged infrastructure to transport cotton stocks. China's decision in April 1998 to reenter the market as a major exporter may be impacted by the floods. If it reverses its decision to export, such a decision would decrease available supplies and competition on the world market. Since China may hold 40 percent of the world's stocks, its policy with regard to exports and imports is a key to the assessment of flood impact.
From MY 1993/94 until early 1998, China was the world's largest cotton importer, the largest market for U.S. cotton, and an insignificant cotton exporter. Imports of U.S. cotton peaked at more than $720 million, or 1.85 million bales in MY 1995/96. Despite some welcome moves in recent years to allow increased imports by private mills, China never fully committed to the end of state involvement in trading. China's cotton imports from all sources have dropped to 1.0 million bales this marketing year. China's exports are estimated at 2 million bales.
The announcement of Tender #1 in mid-April had a deep impact on the futures market. China sold nearly one million bales of cotton, contributing to a dramatic decline in world prices. This signaled a reversal in China's practice of building cotton stocks -- which have now worked down to an estimated 15.3 million bales. Tender #2 appeared May 28, 1998, but it was withdrawn after the Chinese expressed disappointment at low bids. Tender #3 has been expected by the trade since the withdrawal of Tender #2, but Tender #3 has been conspicuous by its absence.
In MY 19988/99, U.S. cotton exports, estimated at 4.9 million bales, will be more affected by short supplies in the United States than China's export activity. Conversely, traditional U.S. cotton competitors are expected to have adequate supplies to provide the international market during MY 1998/99.
For more information, contact Paulette Sandene, Production Estimates and Crop Assessment Division, FAS, USDA at (202) 690-0133
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