October 28, 2010

 

China set to raise 2010-11 corn imports

China is set to expand its reliance on corn imports in the coming year, although there is little consensus on the overall balance of supply and demand, an industry poll of 10 forecasters showed Wednesday (Oct 27).

 

China, which imported 1.3 million tonnes of corn in the year to September, will import 2.25 million tonnes in 2010-11, according to the median forecast. That is more than double the one million forecast by the USDA.

 

The world's No.2 corn consumer fired up US prices in 2010 as it bought the biggest volume for 15 years on the overseas market, filling the gap between a lacklustre harvest and swelling demand for corn-based animal feed.

 

Although China's Agriculture Ministry has stressed the crop brought in this month was a bumper harvest, many corn traders think China will never again close the supply-demand gap on its own.

 

High US corn prices may have closed the door to commercial shipments while China digests its harvest, but the government may already have booked as much as three million tonnes for the first half of next year, says a senior analyst.

 

"We believe a certain amount of US corn has been booked for state reserves next year, otherwise it would be too late," said the analyst.

 

"Grain security is more important than prices. The December to June period is a good time to buy, because US prices are comparatively lower than the rest of the year."

 

China's government does not publish data on corn stockpiles but several analysts estimated they were now around one month's consumption.

 

State reserves may stay low if Chinese corn prices stay high. The government has not yet announced how much it will offer farmers, many of whom are holding onto their harvest in anticipation of yet higher prices.

 

Corn consumption has been propelled by its fast-expanding meat production, both for exports and to satisfy increasingly rich Chinese palates.

 

An analyst estimated that 160 million tonnes of corn was used in animal feed production in 2009/2010, in addition to about 40 million tonnes used by the other big user, corn processors.

 

His calculation was based on the rapid take-up of soy imports, which will this year hit 50 million tonnes, of which 80% is crushed into soymeal, another feed ingredient.

 

"Such large soy imports have not led to any stockpiles of soymeal at ports, indicating that demand for corn should also be very strong from animal feed mills," he said.

 

However, corn may fall next year as feed mills use substitute feed grains or DDGs, a by-product of ethanol production, and the government may restrict consumption by corn processors, he added.