March 26, 2007

US traders dismiss reports that China may be mass-importing corn

US grain traders on Friday dismissed a news report that China would import a huge amount of corn this year.

Interfax China reported on Friday that the country would import 9.3 million tonnes of corn this year, quoting data from China's National Grain and Oil Information Centre. Various news reports had said China would be importing 500,000 tonnes to 2 million tonnes of corn to none at all for this year.

Still, most traders feel that at current prices of US$4.10 a bushel, China would be unlikely to import huge volumes even with a growing need from the meat and ethanol industries.

The skepticism was reflected in the CBOT, where corn prices hardly flinched after the announcement of the news and fluctuated within a 10-cent range.

The gains for some contracts had little to do with China demand but rather, worries of a possible wet planting season in the US that might hamper corn seedings.

Corn futures prices have been trading at around 10-year highs with the spot May contract fluctuating around US$4.10 per bushel on Friday, up over 80 percent in the past six-months.

Analysts agreed that China might be import some corn early next year but doubted the volumes would be large.

If China's economic growth continues and the country produces a normal corn crop next year, they could be a modest net importer of corn in 2007/08, they said.