November 8, 2010

China's corn imports set to rise

China is set to see increasing corn imports due to tight supplies on the domestic market, said Mei Lihong, a Chinese analyst.

According to the statistics from the General Administration of Customs, China imported 512,778 tonnes of corn in September, which is an increase of 7,042.48% for the same period in the previous year. The country's corn imports during the first nine months of the year amounted to 1.227 million tonnes, which is an increase of 8, 643.71%.

"Although China's corn production is recovering this year, corn supplies are likely to remain tight due to increasing demand," Mei said.

China's corn output in 2010 will increase from 5.03 million tonnes last year to 169 million tonnes, according to the China National Grain and Oils Centre (CNGOIC). Meanwhile, USDA estimates the figure to be 168 million tonnes whereas the more conservative estimates range between 160 million and 165 million tonnes.

Although the output is rising, the demand for corn from the livestock industry is likely to remain high due to increasing consumption of livestock. Additionally, 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," Mei said.

In order to ensure domestic supplies, the market has been guessing that the Chinese government intends to import large amount of corn. There are also rumours that the Chinese government is looking at corn prices from the US market and plans to purchase 2-3 million tonnes of corn from them.

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