March 9, 2012


Sinograin to buy foreign corn for profit



Sinograin will still purchase foreign corn this year if it is beneficial and if there is a need to do so, Bao Kexin, general manager at the company, China's state grain stockpiler, said Wednesday (Mar 7).


Bao's comments suggest the company, known as Sinograin, is unlikely to import in the near term because global prices are slightly higher than those in China, where prices are under pressure due to a record local harvest.


Sinograin bought more than three million tonnes of US corn for state reserves last year when global prices were competitive, making it the biggest corn importer in China.


"Last year's corn imports were not planned. We decided to import when the prices of US corn to south China ports are cheaper than those of domestic corn," Bao said.


Transporting corn from major growing areas in northeastern China to major consuming areas in south China costs about RMB100/tonne (US$15.84), he said.


"We will buy when there is a need to or importing corn is profitable," he said, adding that the storage capacity in south China will also be considered when timing imports.


Sinograin will also consider corn from Argentina if its quality and price are right, he said.


Despite strong demand, Bao said the corn supply isn't tight and the state reserves don't lack corn, despite market rumors that Sinograin failed to buy enough corn from the domestic market to replenish depleted state reserves.


Corn consumption by processors that produce non-feed products is likely to stop growing and perhaps even fall as the government reduces subsidies to the sector, he said.


Sinograin will further expand into downstream grain and oilseed crushing to help the government manage inflation, Bao said.


March corn futures on the Chicago Board of Trade closed at US$6.58 a bushel Tuesday, which means prices for imported corn from the US, including freight and tax, will be around RMB2,520/tonne (US$399.21), slightly higher than on the domestic market.


Benchmark September corn on the Dalian Commodity Exchange closed at RMB2,401/tonne (US$380.36) on Wednesday. The contract has rallied 10% since the end of November last year.

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