October 24, 2003
China Corn Exports May Slow But Would Not Be Stopped Completely
Cash offers on Chinese corn for export have risen significantly this week amid fears that a lower local output this year will force the government to cut export assistance, thereby leading to lower exports in 2004.
But Chinese corn exports are unlikely to come to a complete halt as the government wouldn't want to give up an export market that it took pains to develop, trade participants said Friday.
Chinese feed-grade corn for shipment in the first quarter of 2004 was quoted around $130 a metric ton Friday, free on board, up by at least 8% from offers Monday around $120/ton, FOB, for January-February shipment, traders said.
"We are still exporting within this year. But the new crop isn't coming in yet, so I'm not sure about the (export) amount next year...We'll continue exporting, but we'll see a smaller output next year," said an official with China National Cereals, Oils & Foodstuffs Import & Export Corp, or Cofco.
Cofco and the Jilin Grain Group Co., Ltd. are the two authorized corn exporters in China.
"To us, it's clear China will continue to export corn, but exports will be lower for sure," said the corn department manager in Beijing.
Chinese state analysts expect China's 2003-04 corn exports to be around 8 million tons, while the U.S. Department of Agriculture has forecast exports of 8.5 million tons, down from 15.24 million tons exported in the previous year.
Market participants said Chinese exports will continue, albeit at a slower pace, because there is demand for cheaper Chinese corn and the government won't snuff out the export market which it has built up aggressively.
Following the rise in CBOT futures, U.S. corn cash offers were around $160/ton, C&F Taiwan or South Korea Friday, up from $145-$150/ton Monday. That is roughly about $15/ton higher than offer prices for Chinese corn, said traders.
Meanwhile, South Korea's Nonghyup Feed Inc. failed to buy any corn in a tender seeking 420,000 tons because of the high asking prices, said a NOFI official earlier Friday. The lowest offers for Chinese corn for January to March 2004 arrival received by NOFI ranged from $132/ton to $145/ton, cost and freight, he said.
South Korea is China's biggest corn export market.
"We all believe the (financial support for corn exports) will be smaller (in 2004). People are talking about a cut in half...So, the export price has gone up," said a corn department manager at a global trading firm in Beijing.
The Chinese government has been promoting corn exports through financial support in the form of value-added tax rebates and a waiver of transport fees on bulk grain movement.
The total financial support package is around 330 yuan ($1=CNY8.28) a ton, roughly equivalent to explicit export subsidies the government provided before China joined the World Trade Organization in December 2001, trade participants have said.
As a result, exports in calendar 2002 were up sharply by 95% on year to 11.7 million tons, helped partly by the financial support, said participants. According to customs data, China has exported 10.7 million tons of corn through September 2003.
However, faced with a smaller crop this year and strong domestic feed demand, there has been talk of a likely reduction in financial support for exports, in turn pushing export prices up.
Latest estimates by analysts peg China's Oct. 2003-Sept. 04 corn output at 114 million tons, down from around 121 million tons produced in the previous year. The drop in output has been mainly attributed to poor growing conditions amid adverse weather.
