March 13, 2012

 

Chinese feed mills seek to buy US corn

 

 

Some Chinese feed mills are looking to purchase US corn following a surge in local corn prices, traders and analysts said Monday (Mar 12).

 

The most-traded Dalian September contract was traded at nearly its contract high at RMB2,445 (US$390) per tonne on Monday, up 9% so far this year.

 

"Many mills are inquiring about prices and are interested to buy," said one trader with a large domestic feed mill. "Corn from the northeast is too expensive."

 

Corn buys by China, the world's second largest consumer, could bolster US corn futures, which have gained 1.3% so far this year on the back of tightening global supplies after a drought curbed South American supplies.

 

Domestic corn offered from the corn belt in China's northeast was cited at more than RMB2,500 (US$400) per tonne in some parts of the major consuming areas in the south, which compares with US corn now quoted at US$325 (C&F) per tonne for May shipment of the old US corn crop.

 

Argentina corn was quoted at US$320 per tonne, but its poorer quality detracts from its price advantage over US corn, while drought is likely to cut the crop in the South American country, traders said.

 

Potential imminent interest is for 2-3 cargoes of US old crops, much smaller than the big one-off purchase by Sinograin last year. Sinograin, which manages the state reserves, has not entered the overseas market to buy, they said.

 

Sinograin, last year's biggest buyer, is stockpiling domestic corn in the northeast to refill depleted state reserves.

 

"Buyers are showing interest for several cargoes, but we don't expect that much, or 10 cargoes of imports," said Li Qiang, the chief analyst with Shanghai JC Intelligence Co. Ltd (JCI), a private consulting firm, dismissing volumes suggested by some traders.

 

"Not only farmers, trading houses are also holding back corn and not selling, which drives up domestic prices," said Li.

 

Traders said the quality of corn in the country's north was hurt by excessive rains last year during the harvest. Many in the market fear China overstated its record corn crop last year.

 

There are expectations of higher US plantings this year to feed growing global demand.

 

Analysis firm Informa Economics raised its US corn seeding estimate to 95.5 million acres from 94.7 million acres, according to trade sources. The US Department of Agriculture will issue results of its first survey-based acreage estimates in its so-called planting intentions report on March 30.