May 5, 2011

Import prices of US corn dropped Wednesday (May 4) at key Chinese ports, taking a cue from a sharp two-day slump in Chicago corn futures.

A downturn in US corn prices may signal China's re-entry into the market.

Landed prices of No. 2 corn for May delivery fell RMB35 (US$5.39), or 1%, to RMB2,771 (US$427)/tonne in a single day, grain industry research house China Grain Network said in a report.

Chicago Board of Trade corn reached its highest levels since mid-2008 on April 11, but has since been under pressure from favourable global supply cues, compounded this week by a spate of long liquidation and a broad slump in commodities.

US corn futures shed 1.5% Tuesday after dropping 2.9% Monday, and nearby-month corn fell a further three cents during Asian trading hours Wednesday to reach $7.16 a bushel.

US grain lobbies have assessed China's import appetite this year around two million tonnes, but the government has been resisting hefty imports because it wants to preserve self-sufficiency in grain supply, and because corn prices in the US, the world's top producer, had risen to two-year highs.

Last year, China broke a 15-year run of maintaining mostly self-sufficiency in corn, importing 1.6 million tonnes of corn - largely from the US - 17 times more than in 2009.

Corn imports in the first three months of this year have slowed, falling 66% from a year earlier to 5,216 tonnes, partly due to a strong harvest last year.

However, rising spot corn prices in major producing areas of China indicate that demand continues to strengthen.

Tight national corn reserve levels also suggest that China may return to the market. The corn stocks-to-use ratio, an indicator comparing grain reserves with consumption levels, fell to around 37% earlier this year, well below an average of 93% between 1993 and 2003, analysts said.