May 25, 2012

 

China likely to delay huge corn imports 

 

 

Chinese feed mills may postpone big imports of US corn until September when the local crop becomes clear, as feed demand may slow and the country's 2012 corn yield is seen at record level, traders said on Wednesday (May 23).

 

The move would come even as US corn stands about US$79 per tonne lower than domestic prices, which have been hovering at record highs.

 

Feed mills expect domestic feed demand to slow this year because weak breeding margins could lead breeders to reduce livestock numbers, slowing demand for the grain in the months ahead, although corn supply is expected to be tight over the longer term.

 

"We expect a small volume of new deals to be signed. China has already imported quite a lot and feed mills are not expecting good demand in coming months because of poor breeding margins," said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd.

 

Feed mills have also used up most of their import quotas.

 

"There are not many quotas left, maybe 100,000 tonnes, that's all so far," said a trader with an international trading house.

 

"If the government wants to buy more new crop, it may prefer to wait until it is clear how the domestic harvest will be this year," the trader said.

 

China issued a total of 7.2 million tonnes of import quotas for 2012, of which only 40% was allocated to feed mills. Beijing is expected to re-allocate unused quotas to private feed mills in September.

 

China bought about 4.8 million tonnes of old-crop US corn in the 2011/12 marketing year, and the country purchased 900,000 tonnes in the eighth-largest one-day sale ever last week, with most of the supplies for shipment in the next marketing year.

 

Shanghai JC Intelligence's Li said China also expects a bumper wheat harvest due late this month, which would pressure prices of feed-grade wheat, increasing its appeal as a replacement for corn. Feed mills are estimated to use 23 million tonnes of wheat to substitute corn in 2012/2013 (June/May).

 

Chinese farmers have planted their largest-ever acreage of corn this year.

 

Over the longer term, however, China's corn supply is expected to be tight, with a think-tank last week forecasting demand to exceed output in the year to September 2013, supporting imports.