China set for record corn crop amid imports

 

 

A record corn crop may be in line for China this year, a forecast from the country's top grain think-tank said on Wednesday (June 9), despite setting the US corn market abuzz by importing to head off a potential shortage.

 

The size of China's corn crop looked in doubt just weeks ago when poor weather delayed planting in the northeast, the major corn-growing area, raising the possibility that the harvest, which is due in October, could also be delayed and damaged by early winter frosts.

 

But sunny and warmer weather since late May has offset the planting delay and boosted growth of the crop in the northeast, prompting the China National Grain and Oils Information Center (CNGOIC), which made its first 2010 grain output forecast on Wednesday, to put corn output at a record 168 million tonnes.

 

Analysts are not expecting any impact from the delayed planting, noting that warm weather has boosted growth of the crop in the northeast and the yield this year will be higher than last year, when the crop was hit by drought.

 

A harvest of 168 million tonnes would meet China's consumption of about 150 million tonnes, the world's second biggest.

 

Farmers encouraged by higher prices have expanded corn acreage in the northeast, said another analyst, adding that the CNGOIC may revise its estimate of acreage growth from the current figure of only 0.3%.

 

But China's self-sufficiency is doubted by many traders. Last year's harvest was damaged by bad weather, which could have left a big gap between supply and demand.

 

Shanghai JC Intelligence (JCI) Co Ltd estimates last year's harvest at 140 million tonnes, but it also expected better corn output this year.

 

"Production this year will be better than last year and the weather was pretty good (in the northeast). Output may increase by 10 million tonnes at least," said a chief analyst with the company, who has recently visited the northeast.

 

Meanwhile, the government has sought to put a lid on talk of a shortage, although it has been selling reserves to cool prices and given state-owned trader COFCO the green light to import.

 

China has bought nearly 600,000 tonnes of US corn since April in its first meaningful purchases in nearly four years. Expectation of a larger domestic harvest could cool down speculation on Chinese corn prices, which hit record highs on talk of a shortage before receding when Beijing vowed to crack down on hoarding to ensure supply for feedmills.

 

Despite easing prices, Chinese traders said US corn was still competitive after CBOT prices fell to an eight-month low this week on expectation of a bumper US crop.

 

Corn imports by China, the world's second-largest consumer, could pick up again as US corn prices were more than RMB200 (US$29.29) per tonne cheaper than domestic corn.

 

Traders in Chicago said China may have booked one or as many as three cargoes of U.S. corn this week, but feed mill executives could not confirm the purchases and state-owned trading house COFCO also denied it has ordered new cargoes this week.

 

But one official at a feedmill said it was trying to push for an import permit to take advantage of the current price gap.

 

CNGOIC also said it expected the country's wheat harvest to hold steady at 115.1 million tonnes, while China's rapeseed output this year was likely to fall 7.7% to 12.6 million tonnes. Soy output is seen at 14.5 million tonnes, down 3.3% from 2009.