March 8, 2004

China Corn's Discount Fuels Talk Of Quicker Return To Export
 
Traders are expecting China to re-enter the corn market soon following the large discounts of China's corn prices against US corn. However, Beijing may be unwilling to allow more exports before getting any clear idea of this year's new corn output.
 
Corn exports are likely to resume as soon as later this month or early next month, as exporters are keen to take advantage of the huge price discount against U.S. corn, said a Beijing-based trader from China National Cereals Oils and Foodstuff Import & Export Corp., or Cofco, one of the two state-authorized corn exporters.
 
Last month China issued the first batch of corn export quota, totaling 1.40 million metric tons, traders said.
 
The quota breakdown is as follows: Jilin, the top corn-producing province receives 930,000 metric tons, Heilongjiang receives 220,000 tons and Inner Mongolia and Liaoning provinces split 250,000 tons.
 
While China's corn exporters haven't made offers so far to international trading houses, corn prices are estimated to be around $160 a ton, free on board, based on the current corn price in Dalian, said the trader from Cofco.
 
In Dalian, the top corn-exporting port, prices firmed to 1,210 yuan ($1=CNY 8.277) a ton, CNY20 higher than last Friday, buoyed by hopes of resumed corn export activities later this month and recovered demand from end users bird flu concerns eased, traders said.
 
In major corn-producing regions in northeastern China, prices were quoted around CNY1,060-1,140 yuan  a metric ton, CNY20-60/ton higher than one week ago.
 
After adding the Panamax cargo freight from China to South Korea or Japan, the landed cost of Chinese corn could be significantly lower than the U.S. corn, trader said. If fob prices are set at $170-175 and freight costs from China to Japan is estimated to be around $20 or slightly higher, Chinese corn could be quoted at $195-200/ton.
 
The nearby U.S. corn shipment from Gulf was quoted as high as $210/ton this week, C&F Southeast Asia.
 
To keep price sensitive South Korean buyers happy, Chinese exporters just have to keep its corn $10 a ton cheaper than that of U.S., cost and freight.
 
It is likely that China's corn export could pick up after the key government meeting ends this week in Beijing. China's National People's Congress holds annual meetings in Beijing this week, discussing issues from farmer's income to inflation, traders said.
 
"The local governments are eager to export corn. There are talks that Hebei province also intends to export 500,000 tons of corn this year," said another trader from a local grain house in Dalian, Liaoning, Friday.
 
But Beijing's concern over grain supply security could disrupt the exporting enthusiasm of local governments in northeastern China, analysts in Beijing said Friday.
 
According to a recent survey conducted by the Ministry of Agriculture, Chinese farmers intend to shift the corn acreage to soybeans and cotton for better economic returns.
 
China exported 16.39 million tons of corn in 2003, over 40% higher on year, with Jilin exporting 10.47 million tons of corn, Heilongjiang exporting 2.22 million tons, Inner Mongolia exporting 1.85 million tons, and Liaoning selling 1.44 million tons, official custom data shows.
 
Corn production in 2003-04 marketing year is pegged at 114 million tons, compared with the 121.3 million tons in 2002-03, according to the forecast by the U.S. Department of Agriculture.