December 19, 2013

 

 

After tests showed a gene-altered corn strain which is not approved by China, China has rejected more than 600,000 tonnes of US corn since mid-November, taking the volume of such shipments to about 30% of total imports this year.

 

The rejection of more corn by China could further squeeze global prices that are hovering around a three-year low hit this month.

 

Ten cargoes, equivalent to about 600,000 tonnes, is six cargoes more than the number confirmed by China's quarantine authorities by last week, private firm JC Intelligence (JCI) said in a report.

 

The US has urged China to act promptly to approve the genetically modified strain MIR 162, developed by Syngenta AG, with high-level talks between the two sides scheduled in Beijing this week.

 

"The rejections hurt (imports) a lot. Whether there are more rejections depend on this week's talks," said Li Qiang, chief analyst with JCI.

 

China's quarantine agency declined to confirm the number of additional cargoes rejected, saying the situation regarding the testing and rejection of cargoes was changing.

 

The USDA said that China, which has emerged as a leading importer of corn in recent years, is forecast to buy a record seven million tonnes in the marketing year to August 2014, up from 2.7 million the previous year. About two million tonnes of US corn is headed for China in ships and China has already committed to buying another three million tonnes of the US grain.

 

Li said nearly 40 cargoes had already arrived in China since the middle of November, more than half of which had passed the tests.

 

China is the world's no. three corn importer after shifting from exports to net imports in 2010, sourcing nearly all its shipments from the US.

 

Besides a bearish influence on US corn futures, China's rejection is likely to hit cash prices in Asia. The rejections followed a glut in the wake of a record domestic corn harvest. Beijing is trying to shore up corn prices to help farmers.

 

China faces a massive glut due to weak consumption by the animal feed industry. Its corn output in 2013-14 is likely to rise 5.9% on-year to a record 217.7 million tonnes, surpassing consumption, seen at 197 million.

 

Some believe the rejection may have been prompted by other trade disputes between the two countries.

 

China last month fought back against US accusations that it was blocking a World Trade Organisation technology deal, with Commerce Minister Gao Hucheng calling the US "irresponsible".

 

This month, China also launched a trade dispute against the US to fight Washington's accusations of having dumped cheap exports on the US market.

 

China's quarantine authorities added that the US and corn exporters must increase inspections prior to export, and guarantee that corn going to China met Chinese legal requirements and quality and safety standards.