March 16, 2012

 

China's high local corn prices make imports possible

 

 

The corn import potential of China is intact despite a bumper harvest, as domestic prices may combine at high levels, an official from a state-run Chinese concern said Wednesday (Mar 13).

 

China's corn imports in the marketing year that started October 1 will likely be around four million tonnes, more than double the 2010-11 total, said the official.

 

Imports in 2012-13 will likely be steady on year, even with a planned acreage expansion, he said on the sidelines of a grain conference here.

 

The premium of domestic corn prices over delivered US corn is favourable for imports, he said.

 

China's corn area expanded by around 3% to 33.4 million hectares last year due to a shift away from soy and rice, and there is room for another 2% increase this year, he said.

 

The corn belt in northeastern China received less snowfall this winter, but recent showers have improved soil moisture, setting the stage for another bumper crop, he said.

 

China's corn output this year is estimated around 191 million tonnes against consumption around 188 million tonnes, he said. Although supply and demand are balanced, prices have increased in line with input costs and domestic inflation, he said, adding that local corn prices are unlikely to fall soon and may consolidate around current levels.

 

The market is abuzz with speculation that Chinese buyers may have purchased US corn this month to build stocks and cut costs amid high local prices. The official didn't confirm any recent purchases.

 

Chicago-based analyst Dan Basse said that as of early March, corn prices in Guangzhou city in southern China and Shandong province and Dalian city in the north, were equivalent to around US$9.92, US$9.86 and US$9.68 a bushel, respectively, while US Gulf Coast prices were around US$7.20 a bushel.

 

At these levels, at least some areas can import US corn and have positive margins, even after accounting for taxes and freight, said Basse, president of consultancy AgResource Co.

 

He projected China's corn imports in 2011-12 and 2012-13 at five million and six million-eight million tonnes, respectively.

 

Last month, China signed an agreement with Argentina to set up a protocol for imports of Argentinean corn, if needed. It is unlikely that much corn will be traded this year, said Freddy Pranteda, a director with Cosur SA, a Buenos Aires-based commodity brokerage.