October 10, 2006

USGC sees rising corn demand but crop decline on China tour

Corn demand would continue to rise at a time when drought and insect damage in two corn-producing regions in China would reduce the nation's corn crop by 1-2 million tonnes this year, the US Grains Council (USGC) concluded after its annual China tour.

Dr. Todd Meyer, USGC senior director in Beijing, reported the results of the Council's 2006 China Corn Tour last week.

Overall conditions in north-east China, the main corn-growing area, was good, Meyer said. However, the lower yields in the North China Plain and the rest of China would wipe out any gains in the north-east.

Crop yields were about 4-5 percent ahead in north-east China, which produces up to 40 percent of China's total corn crop. However, the growth was negated by losses in the North China Plain region caused by drought and insects. USGC said one province lost a quarter of its production to severe drought.

However, feed demand in China would remain strong despite bird flu and a slump in hog prices as meat demand increases in tandem with income growth, Meyer said. China's corn yields would not be able to keep up with that demand, Meyer added.

Meyer also noted that private companies imported about 60,000 tonnes of US corn recently, despite the 13 percent value-added tax (VAT) as high domestic corn prices drove demand for cheaper US imports.

Although Chinese buyers like the quality and consistency of US corn, the demand would very much depend on prices, Meyer said.