February 6, 2004

Good Chance That China Would Resume Corn Export Sooner
 

An eFeedLink Exclusive Report
 

Of late, rumors have been rife that China will resume corn export very soon, on the basis that eleven regions across the country have been affected by the bird flu outbreak, which causes poultry production to fall considerably. This correspondingly reduces the demand for corn, which make up a major part of the feed content in poultry diet, thereby exerting downward pressure on China's corn prices. The rumors, however, have yet to be confirmed.

For the past two years, continual rising demand for the import of staple resources such as iron ore and coal by China and Japan has substantially driven up shipping charges in Asia. The limited supply of ocean-going vessels has contributed to the rising shipping costs for corn.

Reportedly, the existing shipping quotes on the main routes from the US coast to Japan approximate at US$75-80 per ton, higher than the US$70 per ton registered in the week before. Correspondingly, No. 3 US corn was quoted at US$185-190 per ton, while the existing CNF South Korea quoted at US$180 per ton, which is higher than the week before.

Putting off by the high price levels of the US corn, feed millers in South Korea and Japan choose to increase inventory when corn prices start sliding and are seen holding back their procurement in expectation of China resuming corn export.

The dramatic fall in sales volume of chicken meat, on the concern of the bird flu outbreak, makes it difficult for feed millers in affected countries to impose the rising costs of corn on poultry producers. Consequently, feed millers in Taiwan prefer to import corn from Mainland China, if the Chinese government lifts its corn export ban.

According to the grain output report released by China's Agriculture Ministry, a total of 114.5 million tons of corn are produced in China between January and December 2003, lower than the 121 million tons in 2002. Meanwhile, China's corn stockpiles are expected to fall gradually, which will in turn adversely affect its corn export volume in 2004. Market analysts, therefore, forecast that China's corn exports for 2004 will approximate at 8 million tons.