March 16, 2005

 

China's Jiliang Group jostles for larger corn market share as Beijing raises incentives

 

 

US companies would find themselves competing for sales in Asia's biggest corn import markets as Jiliang Group, the largest Chinese corn trader, is planning to increase exports of the grain to South Korea, Japan and Southeast Asia.

 

China, which is second only to the United States in corn production, would increase tax rebates on exports of the grain to increase overseas sales and slow declines in prices at home. These incentives may more than double the country's corn exports to five million tonnes this year, according to the chairman of Jiliang, Liu Xianlu.

 

Chinese exporters are competing with Archer Daniel Midland, Bunge, Cargill and other trading companies selling the US-produced crop into a $3.3 billion market in Asia for corn.

 

A greater supply may extend price declines in the global corn trade.

 

Corn futures have declined 34 percent since reaching the highest level in seven and a half years last April on the Chicago Board of Trade.

 

"More corn from China would definitely create pressure on the international markets," Carol Gong, an analyst at Rabobank Groep, said from Shanghai. "Southeast Asia requires corn mainly for feedmeal and China has a definite geographical advantage, as transportation costs are definitely lower.¡±

 

The global harvest is predicted to rise 13 percent to 706 million metric tonnes in the current marketing year ending Aug. 31 from 623 million tonnes in the year earlier, the US Department of Agriculture said on March. 10. The United States is projected to gather 17 percent more of the crop, or 300 million tonnes, this year.

 

The Chinese government has issued export licenses for three million tonnes of corn this year, China National Grain and Oils Information Centre said in a report last week. It has also raised export tax rebates to RMB143, or $17, a tonne, from RMB111.8 a tonne in 2003.

 

Export licenses awarded so far this year already exceed actual shipments of 2.3 million tonnes in the whole of last year, according to customs data. Jiliang expects a second round of permits to be issued later this year, Liu said.

 

The measures may make Chinese corn more attractive, said Kawano Eiichiro, a grain trader at Marubeni, a Japanese trading house, declining to say how much cheaper Chinese corn was compared with US corn at present.

 

"The main decision is price," Kawano said. "Some Japanese companies have shipped China's corn to the western parts of Japan."

 

The cost of shipping corn from China to other parts of Asia is as much as $12 per tonne lower than carrying corn from the United States, according to the Singapore-based Concordia Agritrading.