May 29, 2006

 

Chinese company imports 50,000 tonnes of US corn, more expected
 

 

Xiwang Sugar Holdings Co, one of China's top corn processors, said on Thursday (May 29) it would be buying 50,000 tonnes of corn from the US, making it the country's first major import of corn in years.

 

Xiwang president Wang Yong said the company, based in the northern province of Shandong, planned to buy another 50,000 tonnes before the domestic harvest if the first delivery went through smoothly.

 

Wang said US corn was slightly cheaper than domestic corn, which stood at about RMB1,350 (US$168) a tonne.

 

China, until recently a major exporter, is expected to become a net importer possibly as early as next year, due to rising domestic demand.

 

However, doubts remain whether the Chinese government would allow large quantities of US GM corn.

 

China's National Bureau of Statistics also revised the country's 2005 corn crop to a record 139.37 million tonnes.

 

Sunny Leung, Xiwang's financial controller, said the company expected the 2006 average corn price in the province to rise by about 15 percent from RMB1,250 (US$155.7) a tonne last year.

 

Leung said Xiwang planned to expand its annual corn processing capacity by 50 percent to 900,000 tonnes this year from 600,000 tonnes last year, due to its booming glucose operations.

 

For US feed grain producers this development is news that has been much awaited. US Grains Council (USGC) president and CEO Kenneth Hobbie welcomed the news and said the council is pleased with this first step.

 

The development that private buyers in China are starting to buy corn is significant because up until now, China's state trading enterprise, China National Cereals, Oil & Foodstuffs Corp (COFCO), was solely responsible for all corn imports into China.

 

Currently, the minimum access requirement, or TRQ, is 7.2 million tonnes for corn under China's World Trade Organization (WTO) accession agreement. The Council had lobbied for private importers to have a portion of the TRQ allotment annually as part of China's requirement for entry into the WTO

 

The WTO requires China to allocate 40 percent of the TRQ volume to private buyers while the rest goes to state trading enterprises, said Kevin Natz, USGC director of trade policy.

 

However, China's private sector had not purchased US corn because it was not economically viable. Now that prices are more favourable, the private sector is starting to import.

 

The Council identified Xiwang as a key client and has cultivated a relationship with them years before, knowing that corn supplies in Shandong were becoming increasingly tight, said Todd Meyer, USGC senior director in Beijing.

 

The Council correctly predicted that first major buyers would be industrial processors as they purchase corn in larger volumes than most feed millers.

 

Additionally, processors have wider profit margins, thus making them more open to prices.

 

Meyer also added southern China buyers have developed relationships with the Council and have participated in team visits to the US and in various USGC activities in China.

 

The Council has been involved in market development activities to increase feed grain usage in China since 1982. It has also worked to build China's livestock, feed and industrial processing industries.