June 25, 2007

 

China corn trade to slow as feed demand recovery slower than expected

 

 

China is unlikely to import corn at least until the end of this year as feed demand has been slow to recover, industry officials said.

 

Feed demand would be slow to recover, despite Beijing's efforts to raise pork supplies to curb inflation, industry officials said.

 

Moreover, more farmers are now attracted to the cities, which offer far more lucrative jobs than those in the rural areas.

 

Pig diseases, high piglet prices and high corn prices have led to dampened enthusiasm for pig farming.

 

Despite a record crop last year, China's domestic corn prices hit all-time highs in some cities this month, in part due to greater demand from corn processors.

 

For much of the same reasons, China would be unlikely to export as well.

 

Plans for a second batch of corn export quotas, expected to be about 1.6 million tonnes, may be delayed or even scrapped. China has already handed out the first batch of quotas for 2007 totalling 1.4 million tonnes.

 

High feed prices, which causing the current high pork prices, may cause the government to think twice before issuing the quota, officials said.

 

Although domestic corn prices have risen, they are still cheaper than foreign corn, such as those from the US.

 

High corn prices were also prompting feed millers to shift to wheat. Domestic wheat price have been easing because of the winter wheat harvest last month and carryover stocks from the previous season.

 

As wheat prices can be RMB 100-150 cheaper than corn, more feedmillers may use a higher percentage of wheat in their feed.

 

Moreover, Beijing has been purchasing wheat at minimum prices to support farmers and encourage grains production to ensure food security.