October 26, 2006

 

China reins in soaring corn exports to ensure supply

 

 

China's National Development and Reform Commission has tightened control over corn exports in a bid to ensure supplies later this year, traders said Thursday (Oct 26). 

 

The nation's top economic planning agency, concerned over soaring corn exports in the past two months, has taken measures to check the pace of exports.

 

Any contract to export corn would now need to be approved by the NDRC.

 

"The NDRC has not halted corn exports but wants a slowdown in corn exports, as soaring exports may weigh on supplies later this year," said a trader at Jiliang Group Corp., a major corn exporter in China.

 

Chinese grain companies have contracts to export over 3 million tonnes of corn for delivery late this year and early next year, according to local media reports.

 

But the trader declined to disclose what measures the NDRC has taken to control corn exports.

 

"It's a common practice for the NDRC around this time of the year. The NDRC did almost the same thing during the same period last year," said an industry official.

 

"In addition to pressure on supplies, the NDRC is also worried that overheated competition for exports may jeopardise prices of Chinese corn," he added

 

However, "the NDRC has not closed the door on corn exports, as China may face an oversupplied corn market thanks to the (expected) good harvest," he said.

 

China's corn output is expected to total 141 million tonnes in the 2006-07 marketing year, which begins in October, while demand would reach 138 million tonnes, according to the China National Grains & Oils Information Centre, a major government- backed think-tank in the agricultural sector.

 

Chinese Customs data showed the country exported 2.29 million tonnes of corn January-September, down 68 percent on year.

 

Meanwhile, analysts are divided over the size of China's corn crop currently being harvested, with the US Grains Council saying the crop may be lower than last year while a government-backed research body in China has indicated that the corn crop may be higher than last year.

 

A trip to China earlier this month by some members of the U.S. Grains Council, led them to conclude that China's corn crop may fall because of insect damage and drought in some parts of China's corn-growing areas.

 

"We came up with a 1.5 million tonne reduction in Chinese corn production from last year," Bill Olthoff, one of the USGC delegates, told an Illinois newspaper.

 

China produced 139.4 million tonnes of corn in 2005.

 

Meanwhile, the China National Grain & Oils Information Center, has forecast that China's corn crop would be around 141 million tonnes, up 1.1 percent from 2005.

 

However, analysts at an independent Chinese commodities brokerage firm JCI told Dow Jones Newswires that their estimates show the corn crop in 2006 would be at the same level as 2005.

 

Traders in China give more credence to the government-backed estimate of corn crop.

 

"We mostly rely on the production figures provided by the government organisations, since it's quite difficult for any trader to verify the corn crop of such a big country as China on his own," said a trader with a large Beijing-based grains trading firm.