December 27, 2013

Despite the good US crop and reports that US corn exports are being turned away by China, US corn futures prices remain above US$4.

Since mid-November, China has turned away about 180,000 tonnes of US corn, according to a Reuters report. The Chinese blamed refusal of the corn on it being genetically modified with MIR162 for insect resistance. But the news service adds that the turned-away corn may be due to WTO squabbles between the US and China.

March corn prices remain stable at about US$4.30 per .025 tonne after new-crop December closed at US$4.10. Mark Welch, Texas A&M AgriLife Extension economist, says overall demand for US corn has remained strong.

Welch says China is becoming more dependent on imported grain. "I think China is an increasingly important destination for US feed grains and DDGs," he says. "So you want to provide what the customers want on legitimate terms. I don't think the (GMO) concerns will destroy trade relationships, but there are issues we have to work out."

He notes that even with the good 2013 US crop, which helped fill a near-empty supply pipeline, corn carryover stocks remain normal.

But lower prices remain possible. "If it looks like we will have another big crop that will add to those stocks, then we could see corn futures pressing down toward the US$4 level," Welch says. "EPA's action on fuel standards and a major customer questioning supply also weigh on the market."

Meanwhile, there are reports that about two million tonnes of US corn are headed for China in ships and China already has committed to buying another three million tonnes of the US grain. According to news reports, China last month fought back against US accusations that it was blocking a WTO technology deal, with a Chinese official calling the US "irresponsible."

Welch says some wonder if the China incidents "are legitimate concerns, or if it's a marketing ploy to gain leverage."