May 24, 2004

China Seen Announcing Additional Corn Quotas

China's government is likely to announce more corn export quotas for the second half of 2004, after corn exporters used up the first batch, traders and analysts in China said Friday.
 
The smooth planting progress of corn in major Chinese producing regions, along with the flagging domestic markets, fueled hopes that Beijing could rethink a second set of export quotas, traders said.
 
The second tranche is expected to total 1.60 million metric tons or higher, traders in China said.
 
In February, China's government allocated the first batch of corn export quotas, equivalent to 1.40 million tons for the first half of 2004, compared with 6.69 million tons exported in the same period of 2003.
 
"The second batch of corn export quotas is not allocated yet, but it could be higher than the first batch," a trader from China National Cereals Oils and Foodstuff Import & Export Corp, or Cofco, one of the two state-authorized corn exporters said Friday, adding the government will soon allocate the additional quotas.
 
Jilin Grain Group, the other authorized corn exporter, is believed to have also used its entire quota already, traders said.
 
Chinese corn has been virtually out of world markets since early 2004, as Beijing wanted to keep more corn at home to avoid a sharp price rally, following record exports and falling production last season.
 
In the first four months of 2004, China only exported around 1.11 million tons of corn, down 75.3% from the 4.48 million tons exported in the same period of 2003, custom figure shows.
 
China's State Development and Reform Commission, or SDRC, the top grain trade policy making body, was said to set the total corn export quota for 2004 calendar year at 3.00 million tons earlier this year.
 
But grain traders and analysts speculated SDRC could make an upward adjustment of the export quota for the second half of 2004.
 
"Domestic corn markets are flat or weaker now, quelling fears about a strong grain rally. The corn planted area and crop condition in northeastern China also turned out better. It means the government could be less concerned about the threat of a severe supply shortage before next harvest this fall," an analyst from a local brokerage house in Dalian, Liaoning province, said Friday.
 
Officials from SDRC were not available for comment.
 
SMOOTH PLANTING
 
In recent weeks, corn markets in southern consuming and producing regions stayed virtually flat, largely due to selling pressure from grain companies worried about the quality of corn stocks. Corn with high moisture levels could deteriorate quickly when the weather turns warm and rainy in May.
 
Corn prices in Guangdong were quoted around 1,430 yuan ($1=CNY8.277) a ton, almost unchanged from the level of one month ago.
 
"The grain companies hoping for a strong rally were disappointed to find the seasonal recovery of demand for corn products from livestock industry failed to come as expected, and they were forced to sell," another trader from a local grain companies in Beijing said Friday.
 
In northern China, corn markets were also most quiet, as there are not many on-farm stocks and farmers are focusing on fieldwork.
 
Corn planting has progressed smoothly in the past weeks, and acreage is likely to exceed earlier estimates, local traders said.
 
The recent sharp fall of soybean prices could have prompted farmers to plant more corn, which have fluctuated in a narrow range in the same period, analysts in Beijing said.
 
As of May 12, the farmers in Liaoning province planted about 1.26 million hectares of corn, 386,670 hectares higher than the same period last year, traders said, citing the figure from local agricultural authorities in Liaoning.
In Heilongjiang province, farmers planted 2.325 million hectares of corn as of May 17, 16.2% higher than the planned acreage, traders said, citing the local government figure.