According to the observations of the U.S. Grains Council, two corn-producing regions in China have suffered enough drought and insect damage to cause the nation's corn crop to drop probably about 39-79 million bushels from last year's total of 5.48 billion bushels.

The U.S. Grains Council's 2006 China Corn Tour assessed China's corn crop, finding mixed results and an overall decline.

"We saw good conditions overall in Northeast China, which is the area that typically grows more corn than they can use in the region," says Dr. Todd Meyer, USGC senior direct in Beijing, China. "However, I think the lower yields that were seen in the North China Plain and throughout the rest of China will offset any gains that were made in the Northeast."

Meyer sees a continued feed demand in China, with an increasingly urbanized population demanding more meat, milk and eggs. "All of this leads to stronger demand growth and right now we don't anticipate corn yields keeping up with that demand," Meyer says.

In Northeast China, which produces close to 40% of the national corn crop, yields stayed about 4-5% ahead, but drought and insects damaged yields in the North China Plain and one province suffered a 25% production drop due to a severe drought.

With high corn prices in China, U.S. corn did well there this summer. In recent months, private tariff rate quota holders imported about 2.36 million bushels of U.S. corn.

Although Chinese buyers like the quality and consistency of U.S. corn, Meyer says price is key: "It is a price relationship when it comes to importing U.S. corn. If U.S. corn is more economical than Chinese corn, they may import."