July 15, 2004

 

 

China to Issue 7 Million Tons of Corn Export Quotas for 2nd Half 2004

 

An eFeedLink Exclusive Report 
  

Traders reported on Wednesday, July 14, that the Chinese Government is ready to issue, or might have issued corn export quota for 2nd half 2004.

 

According to some traders, the total export quota is likely to be as high as 7 million tons, much higher than the 1.4 million tons issued in the first half of the year. Nevertheless, as China's corn export prices are still higher than in the US, it has lost its competitiveness in the international markets. As such, the substantial export quota will not have immediate effect on the export market for the time being.

 

One trader from Tokyo believed that Chinese corn suppliers have already received the export quota for the next six months, although they are unwilling to reveal.  This trader said, "We heard that the Chinese government has issued 7 million tons of corn export quota, but the sellers will first have to use up the quota balance issued for the first half of the year."

 

Meanwhile, a Shanghai trader believed that a 7 million-ton export quota for the second half of the year is not possible, given the dwindling corn reserves in China and the lack of competitive pricing.

 

A senior official from COFCO (China National Cereals, Oils & Foodstuffs Import & Export Corp) said that the Chinese Government has to date not issued corn export quota for the second half of the year. While the government is working to arrive at a decision on the export quota, COFCO has nearly used up its quota allocation for the first half of the year.

 

FOB prices of Chinese corns currently hover around US$150/ton, compared to US$165/ton at the end of last month. Current CNF prices of US corn are US$157/ton in South Korea. 

 

Reportedly, some feed millers in Asia are likely to switch from corn to feed wheat from the Black Sea region. CNF prices for Black Sea region's feed wheat has currently fallen below US$140/ton in Southeast Asia. 

  

China to Export Corn from the North and Import Corn to the South        

 

Some traders pointed out that China is setting its sights on the future, with plans to import corn to its southern regions and concurrently export corn from the northeast regions to neighboring Japan and South Korea.

 

When factors such as shipping costs are taken into consideration, it is more economical for China to export corn from its northern regions. This coupled with the comparatively lower cost to import corn to the southern region, Chinese corn would continue to be exported from the north.

 

Japan Would Be The Major Buyer of Chinese Corns

 

Owing to the excessively high storage cost in Japan and the spread-out distribution of feed millers throughout the country, Japanese importers have become the major buyers of Chinese corn. To save cost, Japanese buyers may import small quantities of corn from China, which would not take long to arrive, with the geographical proximity.