China starts small with corn imports

 

 

The Middle Kingdom, already the world's largest soy buyer, will likely become a net importer of corn within a decade, with ''modest'' purchases.

 

The nation, an exporter of the feed grain, will turn to importing by 2018 as the government puts priority on boosting output of rice and wheat, staples for its 1.3 billion population, Ken Ash, trade and agriculture director at the Organisation for Economic Cooperation and Development, said in an interview in Tokyo yesterday.

 

Corn advanced to a record last year as demand increased for the grain used in animal feed and biofuels. Japanese trading companies such as Sojitz Corp. are planning to diversify supply sources to former Soviet Union countries and South America on expectations that China will become a buyer of US corn.

 

''I expect China to become a net corn importer within five years unless prices of the grain rise to the level that will spur farmers to increase production,'' said Ruan Wei, senior researcher at Norinchukin Research Institute in Tokyo.

 

Corn for March delivery on the Chicago Board of Trade rose 0.3 percent to US$3.845 a bushel at 10.30 a.m. Tokyo time. The futures reached an all-time high US$7.9925 on June 27, 2008.

 

China may import about two million tons of corn a year, compared with purchases by Japan, the biggest importer, of 16 million tonnes, according to Ash, based at the OECD's Paris office.

 

''In the medium-term, China will become a very modest net importer,'' he said. ''It will not have a major impact on the global market.''

 

China is forecast to export 500,000 tonnes of corn in the 2009-10 year, according to a November 10 report by the US Department of Agriculture. The volume is 91% below China's 2006-07 exports of 5.27 million tonnes.

 

Imports could reach five million to seven million tonnes a year by 2014 as China needs corn for production of feed, sweetener, biofuels and other industrial applications, according to Wei at Norinchukin Research Institute.

 

China will remain a net exporter of wheat, selling one million to two million tonnes annually in the global market, Ash said. The nation will also keep exporting rice, with 2-3 million tonnes of shipments a year, he added.

 

''China looks to be trying to use its available land, water and other resources in a way to maintain a certain level of output and not to rely too much on the world market,'' Ash said. ''If China does go into the world market in a big way, prices will go up and China understands this.''

 

China has approved strains of GM rice and corn as safe to grow and use, according to a Ministry of Agriculture statement dated December 1. Further approvals are required before the crops can be grown commercially, the ministry said.

 

''Science, including biotechnology, is a part of the menu that can make sure that we continue to feed the world,'' Ash said, adding that the technology will help China minimise its reliance on grain imports.

 

Corn, wheat and rice in Chicago rose to records last year, boosting food prices and triggering riots in some developing countries. Prices of the grains, on an inflation-adjusted basis, will stabilise as supply catches up with demand growth, Ash said.

 

''We expect, over the next few years, grain prices would be about between 10 and 20% higher in real terms than prior to the spike,'' he said. ''Then they would continue to trend downwards very gradually.''

 

Prices will be capped as improving productivity in developing countries contributes to rising output, Ash said.

 

''In developing countries, there are still significant lands available,'' he said. ''Even with existing technologies, the opportunity to increase output is very significant.''