September 14, 2012

 

China's corn imports for 2013 may decline by more than 80% from 2012's estimated acquisitions.

 

China, the world's second largest consumer, has been influencing global corn prices over the past two years as it emerged from self-sufficiency to become the world's sixth largest importer in 2011/2012.

 

While US corn prices have climbed to record highs as the worst drought in half a century grips large tracts of farmland in the top exporter of grains, China is on track to produce an all-time high crop of around 197-200 million tonnes this year.

 

China is expected to import one million tonnes of corn in 2013, China National Grain and Oils Information Centre (CNGOIC) said in a report, which would be the lowest imports of the grain made by the country since 2009. In 2012, China is estimated to buy 5.5 million tonnes.

 

"Rising U.S. corn prices have caused some contract cancellations," the centre said, adding that most of this year's imports, though much higher than a year ago, were supported by the government's purchases.

 

CNGOIC's estimate of China's 2013 imports is not far from the two million tonnes estimated by the USDA in its monthly global demand and supply report. The global trade of corn is around 90 million tonnes.

 

"With the rally we have had in global prices since June, it is no longer attractive to ship corn to China," said Victor Thianpiriya, agricultural commodity strategist at ANZ in Singapore. "Looks like they are going to have a reasonable crop, so they are going to have a buffer."

 

Chicago corn prices have surged about 45% over the last three months in a drought-fed rally.

 

Feed millers in China have been substituting expensive corn with feed wheat in order to keep a lid on rising costs of fattening animals. Corn is a key ingredient in making animal feed in China - the world's top consumer and producer of pork.

 

China's food price cycle is driven in a large part by pork, the country's staple meat. Any increase in food prices is expected to push up inflation, one of China's biggest economic concerns given the potential for rising prices to trigger social unrest.

 

Corn output in China is estimated to rise 2.19% in 2012 to 197 million tonnes, CNGOIC said this month, from a year ago. The USDA estimates China's corn output at a record 200 million tonnes.

 

Traders at an industry conference in the southern coastal city of Shenzhen were sceptical about these estimates.

 

They said the harvest was more likely to be flat on-year at 180 million tonnes due to adverse weather, while an analyst pegged it lower than that.

 

"If the early frost hits the crop in the northeast, as already in parts of Inner Mongolia, output this year could be lower than last year," said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd, a private analyst company.

 

JCI estimates the country's 2012 output at 170 million tonnes, far below the official estimate.

 

Crops in the northeast corn-belt have also been damaged by a serious disease outbreak and a typhoon last month, a trading executive with an international trading house said.

 

Traders expect feed mills in China to turn to Argentina for corn imports amid near record U.S. prices.

 

Chinese feed mills have already bought a small volume of corn from Argentina in containers, which is cheaper than domestic prices in major consuming areas in the south, the executive said, declining to be identified.

 

"China is unlikely to buy more corn from the US, but they are looking at Argentina corn, which is US$50/per tonne cheaper than US. corn," the executive said.

 

China's corn imports in the first seven months of this year stood at 3.13 million tonnes, already higher than the total imports of 1.75 million tonnes in 2011, according to customs data.