October 14, 2011
The USDA on Thursday (Oct 13) confirmed the sale of 900,000 tonnes of US corn to China, the country's second largest order in a single day which reportedly formed part of 1.5 million tonnes of corn booked by China this week.
The world's largest agricultural consumer was said to have ordered US or Argentine corn. Exporters are required by US law to report large sales within 24 hours.
An even bigger sale of 1.25 million tonnes was reported in March by the USDA and assigned to an unidentified buyer, which was widely believed to be China.
Analysts and traders said they were expecting China to buy even more in coming weeks to restock depleted reserves.
"The 900,000 tonnes is to build up a little bit of their reserves after clearing out old inventories as they plan to do in November," an analyst said.
"China's been buying corn on big price breaks. If we continue to see corn prices drop off, maybe down to the US$5.50 (per bushel) level, we could see another massive import tender," he added.
Benchmark US corn futures Cc1 on the Chicago Board of Trade have tumbled about 20% since late August, going from about US$7.65 a bushel to less than US$6 last week. That was the first dip below US$6 since January. Spot month futures closed at US$6.38-1/4 per bushel on Thursday.
Widespread trade talk of Chinese business sent corn futures up the 40-cent daily trading limit on Tuesday.
In March and in June the grain markets were jolted by rumours that China was seeking corn. Days later USDA confirmed large sales to unidentified buyers.
China's soaring appetite for corn has the world's second largest consumer turning to imported supplies for a second consecutive year, even as it is expected to have a bumper corn harvest.
On Wednesday, the USDA forecast a record Chinese corn crop of 182 million tonnes, up 5% from its previous estimate. All the additional corn will be used as feed, said the USDA, resulting in a slight drawdown in Chinese reserves.
China's growing population is getting wealthier and eating more meat. As a result the country is producing more meat from livestock herds fattened on corn, which should make China a steady and large importer, experts said.
Private forecasts, including the US Grains Council, suggest China may import up to 10 million tonnes in the current marketing year, which would make China, once self-sufficient in corn, the world's second largest importer behind Japan.
The USDA retained its view that China would import two million tonnes in the current season, but analysts said that figure was understated after this week's purchases.
That volume would be dramatically larger than its imports of around one million tonnes in each of the past two crop years.