As per the latest release by United States Department of Agriculture (USDA), China's MY2016/17 wheat production is down 1.34 million tons, or 1.03 percent, from MY 2015/16 on lower yields. MY2016/17 is the first year that China's wheat production has fallen after 12 consecutive years of wheat production growth, an historic feat in agricultural production. Higher than normal precipitation at the end of the growing season from April to July 2016 significantly downgraded crop quality and yields across several East China wheat-growing provinces including, Henan, Shandong, Jiangsu, Hubei and Anhui. A September 2016 State Grain Administration survey reported that the rate of sprouted, unsound, and musty kernels rose to a national average of 7.1 percent, 1.6 percentage points higher than the 2015 crop season. Industry sources have suggested that potentially more than 10 percent of grain may be spoiled. Industry sources report that as much as 24 percent or higher of the crop may be out-of-condition in Jiangsu, Anhui, Henan, and Hubei.
Total wheat consumption in MY 2016/17 is raised 1.0 million tons to 118.0 million tons from the USDA January forecast on a surge of 1.0 million to 16.0 million for feed and residual use. MY2016/17 feed use is forecast at 16.0 million tons, 1.0 million tons higher than the January 2017 USDA estimate. Industry sources report lower quality MY2016/17 wheat supplies, causing a shortage of standard, milling-grade wheat in China's central and southern production regions and in the shortterm higher rates of feed use. The fundamental wheat supply structure is unchanged. With rapidly dropping corn prices, feed use of wheat will subside by March 2017.
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