March 2, 2011

 

Cofco defers US corn buying on high costs 

 

Cofco Ltd, China's state grain trader, is holding back from making US corn purchases due to high prices, an executive said Tuesday (Mar 1).

 

The company had said late last year that it might consider re-entering the US market after the Lunar New Year depending on prices.

 

Cofco's appetite for US corn is a key indicator of China's demand for grain imports and level of self-sufficiency, as the company is a major grain buyer for the government.

 

"US corn prices are now very high, at RMB2,700 (US$411)/tonne, compared with RMB2,200 (US$335)/tonne for domestic corn, so we cannot make that argument," the executive said. "It's really just a market problem, not a policy or political issue."

 

The import price includes shipping costs and value-added tax.

 

China's imports of US corn last year jumped nearly 18 times over 2009 to 1.6 million tons, reaching a 15-year high, but imports in January fell 84% on-year.

 

Price pressures have been rising not just in the US but also in China, where food prices rose 10.3% on-year in January, a leading contributor to sharply higher inflation.

 

The executive said major state grain buyers have temporarily stopped even local purchases of corn as part of semi-official efforts to hold down food price increases.

 

"At the moment, it's true that state-owned enterprises have stopped buying corn from local farmers so prices can come down. If they come into the market, it will push (corn) prices quite high."

 

Some market sources indicated that the suspension of domestic corn purchases would last two or three months, the executive said.

 

Corn prices in Heilongjiang province have risen about RMB100 (US$15)/tonne to around RMB1,980 (US$301)/tonne in the last two months, though they have reached about RMB2,200 (US$335)/tonne in other areas like Shandong province.

 

Local media have published contradictory reports on whether major grain purchasers, including China Grain Reserves Corp or Sinograin, have been asked by the government to temporarily suspend domestic grain purchases as part of official efforts to contain food prices.