November 06, 2003

 

 

Taiwan Seeks Chinese Corn But Mainland China Has Little To Sell

 

Taiwanese livestock producers have asked the government to lift a ban on the import of Chinese corn, but even if the ban goes, China will be hard pressed to service yet another market as its own domestic crop will see a decline this year, traders said Thursday.

 

"The situation will be worse (than it is now) if Taiwan comes in. There will be nothing (Chinese corn) for them," said a Singapore-based veteran trader with a global commodities firm.

 

Amid falling Chinese output and dwindling stocks, Asian participants have been bracing themselves for the possible withdrawal of China from the corn export market.

 

Earlier Thursday, an official from the R.O.C. Federation of Swine Cooperatives in Taiwan said they have asked the government to allow the import of corn and soymeal from China, after domestic prices in Taiwan increased sharply.

 

"We submitted our proposal in October, but there's been no word from the government yet. If this is approved, we'll import immediately," the official said.

 

The swine cooperative and the chicken producers association have asked to be allowed to import a total of 50,000 metric tons of the Chinese commodities each month.

 

Taiwan traditionally doesn't allow the import of Chinese grains because of sour political relations with the mainland.

 

When asked if China will be able to deliver corn to Taiwan if the ban is lifted, an official from China's state-owned China National Cereals, Oils & Foodstuffs Import & Export Corp., or Cofco, said: "We can't know what will happen until they (Taiwan) make a decision."

 

2004 CHINESE CORN EXPORTS STILL IN DOUBT

 

Chinese offers have been scarce as the two state-authorized exporters, Cofco and Jilin Grain Group Co., have stopped quoting prices. The government has reportedly suspended the reviewing of applications for corn exports in 2004.

 

China exported 11.7 million tons of corn in 2002, up 95% on year and 2003 exports are expected to reach a record 13 million tons, according to trade estimates.

 

But 2004 exports are in doubt following expectations of a smaller output of 114 million tons this year from 121.3 million tons in the previous year.

 

Traders said views remain divided as to whether China will halt exports completely or just curtail the volume of overseas sales. A decision by the Chinese government is likely end of the year or early 2004, they said.

 

"Some people are talking about 4 million tons of Chinese exports next year. If that has to be shared by Taiwan, South Korea and Japan...wow, I can't imagine," said a Seoul-based trader.

 

There is talk that suppliers who have committed Chinese corn for 2004 shipments may default on contracts or deliver other origins if Chinese corn isn't available.

 

This is in addition to talk that some cargoes have already been canceled.

 

"We understand one or two cargoes for Malaysia were canceled. The suppliers sold at a low price, but they had difficulty covering when Chinese prices went up. So people have been looking for alternatives, like buying corn from Thailand. We heard one cargo for Indonesia was diverted to Malaysia," said a trader in Kuala Lumpur.

 

TADERS RUSH TO BUY US CORN ON FEAR CHINA MAY STOP EXPORTS

 

The possibility of China exiting the export scene has rattled world markets, sending Chicago Board of Trade corn futures bounding higher on the prospects of a possible return of Asian business to the U.S. market.

 

South Korea, China's biggest corn export market, is already stepping up U.S. purchases, said traders. Last year, China exported 6.1 million tons of corn, or more than half of total exports, to South Korea.

 

A few South Korean feed companies bought 52,500 tons of U.S. No. 3 corn in a tender Wednesday. Noble Grain was the supplier, at US$156.08 a ton, cost and freight, and the cargo is expected to arrive Jan. 20, 2004.

 

There is talk that after the tender, South Korean feed companies bought an additional three or four cargoes of U.S. corn via private negotiations around US$156/ton, C&F, for January-March shipment.

 

Fearing increased South Korean buying, Japanese importers are now trying to buy more U.S. corn before prices head higher, traders added.

 

Analysts in the U.S. said the absence of China could mean an additional 200 million-300 million bushels added to U.S. corn consumption. Unlike China, the U.S. is seeing a record corn crop of 10.2 billion bushels.

 

Still, some participants don't hold any hopes that Taiwan will lift its 50- year-old ban on Chinese corn. The temporary lifting of the ban in October- December 2002 was due to a shortage of U.S. corn supplies, and Taiwan price movements are unlikely to compel the government to do it again this year, said participants.

 

Furthermore, this isn't the first time livestock producers in Taiwan have asked the government to lift the ban on Chinese corn, which is cheaper and has shorter shipment times compared with U.S. corn. Faced with increasing imports, Taiwanese livestock and feed companies have been under pressure to lower production costs.