February 27, 2004

Tight Supply in China Re-Direct Corn Importing Countries Elsewhere

China's recent announcement of its considerably low corn export quota for this year may result in many countries looking elsewhere for the commodity.

David Reynolds, a market analyst with the International Grains Council (IGC) said, 'China's corn exports are likely to be a lot lower than last year, which saw 16m tonnes of corn exported. In comparison, this year, the quota is set at 1.4m tonnes.

'These are just initial numbers and it is impossible to rule out the chances of more corn available for export later. However, you have to keep in mind that China is looking to avoid a domestic shortage.'

According to IGC, countries which saw imports from China last year include South Korea, which imported 7.4m tonnes of corn, Malaysia which imported 2.6m tonnes, Indonesia at 1.7m tonnes, Japan and Iran, which imported 600,000 tonnes each, and Vietnam, which saw imports of 400,000 tonnes. There were also a large number of smaller transactions.

'It is inevitable that these countries will have to look for other suppliers. The most likely supplier is the US. Last year, there were 78.4m tonnes of corn imported worldwide, out of which the US shipped 42.3m tonnes,' said Mr Reynolds, adding: 'Other possibilities include Argentina and Brazil, both of which have had good crops this year and could export up to 11m and 5m tonnes respectively.'

'In light of the fact that GM food has been an issue in the past, with South Korea imposing restrictions on US imports of GM crops, this may prove an issue with imports from the US again if there is no easy availability of non-GM grain or there is no clear segregation. However, it all depends on price.'

Other potential suppliers include Hungary although it is unlikely to export much to Far East Asia and South Africa.

However, Mr Reynolds cautions: 'Although South Africa has big stocks at present, there is a possibility their stocks may run short soon. Then South Africa could be looking for suppliers itself.'

With livestock playing such a large part in the domestic consumption of grain, it would be easy to assume that a larger amount of grain will be available for export as opposed to use for consumption.

However, Mr Reynolds dismisses this: 'Although in theory it is possible, you have to realise that the consumer will demand other sources of meat such as pork, which will be fed with the corn.'

Since the actual state of grain stocks in the country remains a mystery, the effect of the bird flu is hard to predict. What remains clear though, is that it is extremely unlikely that China can satisfy the demand for corn by the countries that have grown to depend on it.