FEED Business Worldwide - December, 2011
Can GM corn hold off China growing dependence on imports?
by David LIN in Shanghai
In late May 2011, China Grain Reserves Corporation (Sinograin) officially announced its purchase of one million tonnes of corn from the United States, which reached the port of Zhejiang in June. Based on CBOT corn future prices during that time period, the estimated import price (after transport costs and import duties) was about RMB2,758/tonne (US$10.88/bushel), RMB388/tonne (US$1.53/bushel) higher than locally-produced corn.
Sinograin said that the US corn imported by its Zhejiang and Guangdong subsidiaries is being used to rebuild state reserves rather than as animal feed. This is understandable, as repeated grain reserve sell-offs over the previous two years had depleted state inventory volumes. Such large import purchases pointed to two facts - China's internal corn supply has reached critically low levels, and that domestic corn prices are poised to rise further.
From exporter to net corn importer
China is the world's second largest corn producer and was once the No. 2 corn exporting country, behind only the United States. According to Chinas customs' statistical data, as recently as 2003, China's corn export volume was as high as 16.4 million tonnes, an amount comparable to Argentina's current annual exports. It dropped drastically to 270,000 tonnes in 2008 and reached no more than 130,000 tonnes in 2009, with most of this being exported to North Korea for geopolitical reasons rather than economic ones.
On the other hand, China's corn import volumes have been rising rapidly. It reached 65,400 tonnes in 2006 from under 10,000 tonnes in the previous two years. It was in that same year that Xiwang Group imported 50,000 tonnes of corn to alleviate a supply crunch in China. This had paved the way for an influx of foreign corn into China. However between 2006 and 2008, China's annual corn import still fell below the nominal level of 100,000 tonnes.
In 2010, due to tight domestic corn supplies and escalating domestic price pressures, COFCO and New Hope Group imported tens of thousand tonnes of corn from the US, bringing the total import volume to around 1.57 million tonnes. This compared with 127,300 tonnes of corn exported by China over the same year. China therefore, effectively became a net corn importer in 2010.
Fast rising demand; slow growing output
The chief driver of China's metamorphisis into a net corn importer is its rapidly rising feed corn consumption, which is a symptom of its skyrocketing demand for meat. According to eFeedLink statistics, China's corn demand was 158 million tonnes in 2009, some 17 million tonnes more than that year's corn harvest. At 162 million tonnes, demand exceeded 2010's corn harvest by 5 million tonnes.
Similarly, despite an expected bountiful harvest of 172 million tonnes, 2011's corn demand is expected to exceed production by some 7 to 10 million tonnes. It now officially expects to import 5 million tonnes of corn over the next marketing year.
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