August 9, 2010

China's corn imports spark policy shift debate

China's first big purchases of US corn in more than a decade have triggered a debate over whether exports of America's biggest crop are entering a new golden era, but the Chinese government has declined to comment.

The country has imported about 1.2 million tonnes of corn this year from the US, the world's largest producer. That compares with total Chinese imports of less than 100,000 tonnes from all countries in previous years.

Farmers, traders, and agricultural economists are divided over the implications of this surge. Some see it as the arrival of a long-anticipated age of big corn exports to China to feed its increasingly wealthy population. Others think it probably is a short-term blip caused by recent droughts.

Predicting China's corn demand is complicated by the Chinese government's intense secrecy. The Communist Party has long considered grain self-sufficiency a core element of national security, and the leadership reaffirmed earlier this year that China aims to produce at least 95% of the grain it consumes through 2020. But details of the policy are closely guarded.

No one outside the Chinese government is certain whether the shipments allowed in this year are temporary or indicate a longer-term shift. The government keeps the size of its grain reserves secret.

Playing down the recent corn imports, the Ministry of Commerce and the National Development Reform Commission (NDRC) said the recent imports were driven by higher domestic prices for corn, but stressed that they wouldn't hurt Chinese corn farmers and that China's grain reserves are adequate. It didn't address how long the recent influx of corn imports would last.

Most analysts agree that China's corn supplies have been strained by the appetite of its growing middle class, who consume increasing amounts of pork, milk and eggs from animals that eat corn feed-as well as colas and other soft drinks that use corn-based sweeteners. Severe droughts across China's northeastern corn belt over the past two years exacerbated supply concerns.

It is expected that the country might need to import 5.8 million tonnes next year and 15 million tonnes by 2015, heralding "a new era of China importing corn," said Hanver Li, chairman of Chinese consulting firm Shanghai JC Intelligence Co.