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June 17, 2010
China may purchase over one million tonnes of corn
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China, the world's second-largest corn consumer, may buy more than one million tonnes in the next 18 months, in addition to purchases made this year, as economic growth boosts demand, the US Grains Council said.
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''I do believe in six to 18 months, the Chinese will undoubtedly take more than a million tonnes of corn and I wouldn't be surprised to see it be in fact double that amount,'' said Thomas Dorr, president of the council.
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China's economic growth will boost its demand for meat, creating an excellent opportunity for US exporters to sell more corn to meet the needs of livestock farmers, he said.
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The World Bank, in an economic outlook published June 9 this year, forecasted China's gross domestic product (GDP) will expand 9.5% this year, compared with 3.3% for the US and 0.7% for the euro region. The Asian nation's demand for corn may grow 2% to 159 million tonnes in the 2010-2011 season, according to the US Department of Agriculture.
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US exporters reported sales of 120,000 tonnes of corn to China for delivery in the marketing year that ends on August 31, the USDA said June 14. That is in addition to the 595,000 tonnes in reported purchases by China as of May 20, according to USDA data.
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Rising imports by China may help drain excess supply, ending an 8.8% slump in Chicago futures this year. The contract for December delivery was unchanged at US$3.7725 a bushel in Chicago at 8:54 a.m. Singapore time. China, which was a net exporter until 2009, purchased 47,000 tonnes last year, according to a USDA estimate.
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''There is evidence that their demand for high-quality proteins is going to require added energy for livestock rations and we believe it's an excellent opportunity for the US to provide those corn supplies as needed,'' Dorr said.
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The nation's corn imports may be as much as 3 million tonnes this year, as it rebuilds stockpiles drained to help cool domestic prices, said Jay O'Neil, an agricultural economist at the International Grains Programme of Kansas State University.
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The area planted to corn in China is at least 2% lower than expected ''due to abnormal rains, snow and temperatures this spring,'' the council said on its website last week, citing its crop tour in the northeast.
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''We could see imports of close to 2 million to 3 million tonnes if the crop situation there deteriorates further,'' O'Neil said yesterday (June 16). He raised his estimate for imports from 500,000 tonnes in April.
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China sold about 4.67 million tonnes of the grain in weekly auctions from April 13 through May 25 to cool domestic prices, according to data compiled by Bloomberg. Corn futures on the Dalian Commodity Exchange rose to a two-year high of RMB1,984 (US$290.43) a tonne on May 24 as domestic supplies tightened.
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''The market is wondering if the crop outlook will motivate the Chinese government to step in and, via importing, replace domestic reserve corn stocks that have been released and sold recently in an attempt to control inflation,'' said O'Neil, who advises the council.
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O'Neil travelled to China with the council in March to meet with local traders and assess the potential for imports.
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Corn stockpiles in China's Heilongjiang and Jilin provinces have slumped more than 15% and supplies show significant signs of degradation, with as much as 30% of the grain in some storage facilities affected by mould, the council said last week.
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Corn supplies in China's northeastern Jilin province, the country's top producer, may be facing damage from mould because of high temperatures.
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''Mouldy corn can be a problem in stored grain since it is likely to spread'', Mike Callahan, senior director for international operations at the grains council. ''If the mould spores produce mycotoxins, then this can become a serious issue in certain livestock species like poultry and swine.''
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Mouldy corn can be used if mixed with better quality corn and ''the negative effects of certain mycotoxins can be somewhat countered by the use of binding and detoxification products,'' Callahan said.
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Declining stockpiles in China come as the USDA forecast that US inventory of corn will fall to the lowest since 2007 on higher demand from ethanol producers.
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Inventories in the US, forecast to account for 57% of global exports, may be 1.603 billion bushels on August 31, as the nation uses more of the grain to make ethanol, the USDA said on June 10. The agency also trimmed its world corn inventory at the end of the 2010-2011 year by 4.5% from last month.
