September 16, 2010

 

China's self-sufficiency in corn sparks debate

Chinese experts put sharply differing spins on corn supplies on Wednesday (Sep 15), with a State Grain official emphasising short-term sufficiency and a trading executive warning of a growing need to import.

 

China suddenly returned to importing US corn this year after a four-year hiatus, prompted by fears of low Chinese supplies and growing demand from feed mills serving a fast-expanding meat industry. It has already bought 1.3 million tonnes of corn this year, the highest volume in 15 years.

 

"In future, such shortages could expand further and imports could gradually become a regular seasonal fixture," said Fei Zhonghai, assistant general manager of COFCO Agri-Trading & Logistics.

 

Corn imports could hit 1.5 million tonnes this year, since it has imported about 600,000 tonnes of corn already and another 700,000 tonnes are booked and on the way, he added.

 

China could continue to import next year because its supplies may not be enough to meet demand, even though this year's harvest may recover to the 2008 level, Fei said.

 

However, Zeng Liying, deputy head of the State Grain Administration, stated that China still has ample corn reserves and will reap a bumper corn harvest this year, and added that supply and demand were basically unchanged.

 

Although some corn areas in the northeast had suffered flooding and drought, the impact was small, and corn production would increase this year due to larger acreage, she said.

 

The bumper harvest would mean Chinese corn prices are unlikely to rise further, Zeng said, and a large volume of US imports was unlikely.

 

While the government was still undecided on whether it would continue to stockpile corn or offer subsidies to feed mills as it did last year, it could decide to stockpile to protect farmers if corn prices drop amid a bumper harvest, she said.

 

China's corn needs have also been met by imports of a substitute product - dried distillers grains or DDGs, a by-product of ethanol production. Imports of DDGs surged by more than 5,400% in January-July this year to 1.569 million tonnes, a far greater volume than the 282,000 tonnes of corn imported.

 

Traders estimate China's imports of DDGs in the 12 months to September 2010 could reach two million tonnes.

 

The large Chinese corn crop and the increased availability of DDGs implied that the potential for massive corn imports next year may be limited, analysts said.