May 19, 2012

 

China's corn stocks may be limited

 

 

In the year to September 2013, the corn supply of China is forecast to remain tight, leading to greater imports, an official think-tank said.

 

The country's record harvest will possibly fall short due to a rapidly rising local demand.

 

China is estimated to consume 199 million tonnes of corn in 2012/2013, the China National Grain and Oils Information Center (CNGOIC) said on Thursday (May 17). Domestic production was projected at a record 197.5 million tonnes.

 

Although higher imports by China should support benchmark US corn prices, gains are expected to be capped as the market is seen coming under pressure from forecasts of a rebound in supplies from the United States, the world's top exporter.

 

"China currently is looking for low priced new crop ... and expansion of more imports are foreseen," the Center said.

 

It expects 2012/13 corn imports to rise to six million tonnes, up from 5.5 million tonnes estimated for the current year.

 

"It is in line with the expectations and the only notable component is that it came from the Chinese themselves," said Luke Mathews, commodities strategist at Commonwealth Bank of Australia.

 

"China's potential demand remains a supportive influence, however, the market, is expecting a solid increase in global corn production in the next 12 months, led by very strong US crop."

 

US corn rose to a one-week top on Thursday, tracking gains in wheat and supported by China's forecast of a deficit in supplies, a day after the nation's latest purchases helped the market notch up its biggest daily gain in six weeks. Prices sank to a 14-month low last week.

 

China's Dalian corn futures hit a lifetime high of RMB2,497 (US$394) per tonne in March, triggered by tight domestic supply and strong demand from livestock producers.

 

China bought 900,000 tonnes of US corn, including 180,000 tonnes of old-crop supplies, the USDA said on Wednesday.

 

"Again next year China is going to play the role of an opportunistic buyer," said Ker Chung Yang, a commodities analyst at Phillip Futures in Singapore. "Ultimately they might end up buying more than 6 million tonnes they have estimated as prices are attractive to build stockpiles."

 

China's corn imports are likely to jump almost 60% in the year to September 2013, turning it into the world's fourth-largest buyer, according to a Reuters poll.

 

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 5 million tonnes this year, according to a survey of 10 analysts and traders.

 

"We expect domestic carry-over stocks in 2012/2013 at 4.5 million tonnes, which are shrinking from 9.24 million tonnes expected for the current year," the Center said.

 

"Supply remains tight while domestic corn prices would stay at a high level in 2012/13."

 

The country's feed mills are expected to use more wheat to substitute expensive corn, the Center said.

 

Feed producers are likely to use 23 million tonnes of wheat to substitute corn in 2012/2013 (June/May), which is higher than 21 million tonnes estimated this year.