November 2, 2010

China's corn imports to rise on short supplies

China looks set to see increasing corn imports due to tight supplies on the domestic market, analysts said.

Statistics from the General Administration of Customs show that China imported 512,778 tonnes of corn in September, surging 7,042% from the same period last year. The country's corn imports from January to September amounted to 1.227 million tonnes, an increase of 8,643%.

Despite recovering corn production in China in 2010, corn supplies are likely to remain tight due to increasing demand, experts said.

The China National Grain and Oils Centre (CNGOIC) estimates China's corn output in 2010 will reach 169 million tonnes, up 5.03 million tonnes from last year, while the USDA predicts the figure to be 168 million tonnes. More conservative estimates range between 160 million and 165 million tonnes.

Despite rising output, the demand for corn from the livestock industry is expected to stay high due to increasing consumption of animal protein. And rising domestic sugar prices have also pushed up demand from the processing industry.

Given these factors, China's corn inventory at the end of 2010 will be significantly lower than that at the end of 2009, even if corn imports in 2010 reach five million tonnes, analyst said.

The market has been guessing that the Chinese government plans to import large quantities of corn to ensure domestic supplies. A rumour even has it that the Chinese government is inquiring into corn prices on the US market and plans to purchase two million to three million tonnes of corn.

If the rumour is true, China's corn imports this year would increase dramatically from last year. Huge imports by China would drive up global prices and help ease the tight supplies on the domestic market.