BEIJING (Reuters) - China on Friday slashed its 2017/18 corn output forecast to the lowest level in four years after drought and hail hit planting in the northeastern region of one of the world’s top producers, spurring a rally in futures prices.
In its monthly crop report, the agriculture ministry said it expects 2017/18 corn output of 211.65 million tonnes, down 0.7 percent from last month’s forecast and 3.6 percent lower than last year.
The figure in June’s Chinese Agricultural Supply and Demand Estimates (CASDE) would make it the smallest crop since 2013, according to the China National Grain and Oils Information Center think tank.
Farmers in parts of China’s northeast corn belt regions switched to soybeans and substitute grains after drought made it hard to plant corn, leading to a drop in corn acreage, the CASDE report said.
Corn output was also hit by hail in the country’s northern Hebei and central Henan provinces, where heavy rains and wind damaged young crops, the report said.
The most-active Chinese corn futures rose 2.1 percent to 1,672 yuan per tonne, their highest in nearly two months, as some speculators bet on higher prices due to extreme weather.
Concerns about U.S. crops may also have been a factor behind the fresh buying, which broke the usually volatile market out of a prolonged period of rangebound trade, said Meng Jinhui, analyst at Shengda futures.
Prices were on track for their best daily performance in three months.
Weather has also affected crops in the United States, where spot corn futures hit a near one-year high last week on forecasts for potentially stressful crop weather in the Midwest.
China also reduced its 2017/18 sugar import forecast to 3.2 million tonnes from 3.5 million tonnes previously, according to the CASDE report.
China’s commerce ministry imposed hefty tariffs on sugar imports in a ruling last month, closing the gap between Chinese and global prices.
Reporting by Hallie Gu and Dominique Patton; Editing by Richard Pullin