July 6, 2006

 

Approval of China Xiwang's corn imports paves way for further shipments

 

 

China looks set to approve corn imports by private companies as China Xiwang Sugar Holdings obtained approval for a certificate for imports of 50,000 tonnes of corn Wednesday (Jul 5), marking the country's first corn imports in years.

 

A company based in the northern province of Shandong, Xiwang is one of China's top corn sweetener producers.

 

The company first placed the order in May, as a "test order" to see if the government would approve corn imports. The order, consisting of 50,000 tonnes of GM corn from the US, was made as US corn prices were lower than China's.

 

The US supplier would start loading the shipment for arrival at the end of July or early August, said a company source.

 

Now that political considerations are out of the way, the only concerns would be the market.

 

Although recent developments indicated rising corn prices in China which favoured imports, prices of US corn have since risen while domestic prices are seen dipping.

 

This has made other Chinese buyers more hesitant about jumping on the bandwagon even as inquiries from feed mills and corn processors continue to pour in.

 

The announcement by the Agricultural department that China's corn output this year would hit a new record of 142 million tonnes also dampened the mood for imports. 

 

However, some analysts said the decline in domestic prices in July and August is normal as sales are stepped up before the next harvest and prices would be back at higher levels in September, which would then stimulate imports.

 

It is no accident that Xiwang became the first to "test the waters".

 

The US Grains 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.