June 12, 2008

 

China safeguards its feed corn supply with wheat and export curbs 

   
  

Although China is expecting a record corn crop this year and its bumper 2008 winter wheat crop would help make up for any shortage if it were ever to occur, the country's return as a corn exporter remains unlikely, traders said on Wednesday (June 11, 2008).

 

With CBOT corn prices hitting US$7 a bushel yesterday, all eyes were on China, the world's second-biggest corn grower after the US.

 

Traders said that a bumper wheat crop could help meet increased demand for animal feed if unfavourable weather were to cut into the country's 2008 corn crop.

 

Observers say China's wheat crop, currently in harvest, should not pose any problems.

 

The China National Grain and Oils Information Centre last week upgraded its corn harvest forecast for this year by 5 million tonnes to a record 154 million tonnes, equal to nearly 20 percent of world's corn output.

 

Forecast for the 2008 wheat harvest was raised to 112.5 million tonnes, up from its previous estimate of 107.6 million while figures for the 2007 wheat output was raised to nearly 110 million tonnes, from 106 million.

 

China was once the world's second-biggest exporter of corn, but clamped down on exports as rising domestic demand and prices threatened its goal of curbing inflation.

 

Measures such as export duties have effectively brought down prices amid expectations of an abundant harvest.

 

China's corn prices at RMB 1,900 (US$275) in Guangzhou, is now nearly 52 percent cheaper than US corn which is quoted at US$420 (including cost and freight). 

 

Traders said prices any higher than RMB 2,000 would probably prompt livestock producers to use cheaper, lower-protein feed wheat, which is currently below RMB 1,600.

 

"Corn prices in China are unlikely to rally like in the US," said a Shanghai-based official.

  

To keep food prices stable ahead of the Beijing Olympics Games in August, the state-owned Sinograin had also shipped about 10 million tonnes of corn to the main consumption areas in the south, they said.

 

With US corn at record prices, Beijing would only tighten its grip on current supplies and may not issue any corn export quotas this year despite prospects of a bumper 2008 harvest, traders said.

 

Officials said the country may issue only less than one million tonnes for Taiwan and North Korea.

 

Official customs data released on Wednesday showed negligible corn shipments from China in May, while year-to-date shipments have slumped 97 percent to just 110,000 tonnes.