May 9, 2012

 

China's 2012/13 corn imports may reach 60%

 

 

The corn imports of China is seen to jump almost 60% in the year to September 2013, that will make it the world's fourth-largest buyer as Beijing aims to provide livestock feed to meet fast-growing meat demand and cool near record prices.

 

The world's second-biggest consumer and producer of corn is projected to buy 7.9 million tonnes in 2012/13, up from an estimated five million tonnes this year, according to a Reuters survey of 10 analysts and traders.

 

Additional corn purchases by China in the months ahead could tighten US old-crop supply, which is already estimated to reach a 16-year low by the end of the marketing year. China's purchases for the next year could support US new-crop prices, which have been under pressure on expectations of all-time high output.

 

US weekly corn export sales climbed to a 21-year high on the back of active buying by China, which snapped up nearly three million tonnes to rebuild reserves, supporting benchmark Chicago corn futures.

 

While China may be done with the bulk of its purchases for 2011/12, analysts polled by Reuters said the country would be in the market for a much larger volume next year.

 

"I think China's corn imports have been steadily increasing because of a lack of resources to produce more domestically," said Lynette Tan, an analyst at Phillip Futures in Singapore. "Corn yields could come under pressure, so they will need to import more."

 

China is estimated to have already purchased about five million tonnes of corn from the US in this season. It has booked about two million tonnes to be shipped in 2012/13, after emerging as a net importer in the last few years.

 

A purchase of 7.9 million tonnes will be half of what Japan, the world's biggest importer, buys in a year.

 

China's Dalian corn futures hit a lifetime high of RMB2,497/tonne (US$396) in March, triggered by tight domestic supply and strong demand from livestock producers. Changing diets and greater wealth are pushing up demand for corn, a key source of animal feed.

China's National Bureau of Statistics has estimated a record corn crop of 191.8 million tonnes for 2011/12, but several analysts believe the crop had been overstated by enthusiastic local officials to win bigger subsidies.

 

In addition to uncertain weather, China faces a farm labour shortage and higher oil prices feeding into production costs.

 

"Field checks show that planting costs, including labour and raw materials costs, have increased by 15% compared with the same time last year," said Yang Xiaoyun, an analyst of Shanghai CIFCO, who estimated imports would surge to 8.5 million tonnes next year. "China is facing a serious labour force shortage."

 

The USDA will update its estimates of global demand and supply of agricultural products, including China's corn imports, in its monthly report on May 10.

 

Old-crop US corn supplies were expected to shrink to the lowest in 16 years by the end of August, but could be replenished by the next US harvest if farmers plant the largest corn area since 1944 as forecast.

 

Still, some analysts said China's corn imports are unlikely to climb with government focus on improving yields and farmers shifting to corn production from soy.

 

"There is tremendous government concern about food security, and with corn being a very important crop there is likely to be a policy response," said Nicholas Zhu, a isupply calculation."