May 5, 2011

 

 

China Grain Reserves Corp (Sinograin) has started to load its first corn cargo from a US port, trade sources said Wednesday (May 4).

 

There has been market talk that China bought 1.25 million tonnes of US corn in March to replenish its low state reserves. That sale, to destinations that the USDA did not specify, was the sixth-largest single-day corn sale ever.

 

"The loading is from PNW (Pacific Northwest). As we know, Sinograin has bought one million tonnes of old US crop," said one executive with an international trading house, adding that the purchase was for state reserves and exempt from import taxes and value-added tax in China.

 

Another trade source said the cargo was being loaded at Kalama port in the US. Several sources said more cargoes would follow in the coming months.

 

Sinograin has not struck any more corn deals since March, as Chicago corn prices have surged, they said.

 

"We have not heard of any new deals since, prices are too expensive. More purchases could happen if the US reaps a bumper harvest" later in the year, said one senior trader with an international trading house.

 

China made the purchases when US corn prices fell in March on concerns over weak demand from earthquake-hit Japan, the world's largest importer, but since then talk of China's imports coupled with tight US corn stocks have helped reverse the March fall, with front-month Chicago prices up by more than 10%.

 

Traders said China's state corn reserves have fallen to the lowest in years after the government released more than 50 million tonnes of its stocks since 2008. The government had to dig deep into its stockpiles after a big deficit in 2010 caused by a drought-hit 2009 harvest that was too small to keep up with demand.

 

In 2010, China imported 1.5 million tonnes of corn from the US, the largest volume in more than a decade. Those imports were all done by feed mills, which use corn to supply China's growing livestock sector.

 

Due to tight US corn supply, Beijing has recently been releasing low-quality state wheat reserves to feed mills and restricted the corn consumption by corn processors.