April 10, 2012


China buys Ukraine's corn for first time



China, the biggest corn consumer worldwide, has recently begun buying grain from Ukraine, with the first shipment of 50,000 tonnes of corn and wheat already on its way to the country.


This is the first time China has imported corn from the Eastern European nation, with the amount expected to reach between one million and 1.5 million tonnes within the next three years.


Analysts said corn from Ukraine could help reduce the nation's reliance on imports from the US.


In 2011, China imported 1.75 million tonnes of corn, compared with 1.57 million tonnes in 2010, according to data from the General Administration of Customs.


Official data also showed that corn imports during the first two months of this year registered a staggering increase to 1.3 million tonnes, almost the total annual amount in previous years. Industry analysts estimate this year's imports at between three million and four million tonnes. Most of China's current corn imports come from the US.


Oleg Bakhmatyuk, chairman of the board of Ukrlandfarming Plc, the largest Ukrainian agro-industrial company, said it is "quite possible" that China will import one million to 1.5 million tonnes of Ukrainian corn over the next three years.


The company is the owner of the largest land bank in Ukraine, totaling almost 500,000 hectares, and has a storage capacity of more than one million tonnes.


In 2010, it produced about 3% of Ukraine's grain, and 8.6% of its sugar.


Analysts said the Chinese market would welcome Ukrainian corn, given its lower price than US corn and the fact that it is not genetically modified.


"Its lower price would be particularly attractive to Chinese processing factories," which accounted for more than 25% of China's corn consumption in recent years, said Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant Ltd, one of the largest consultancies in the industry.


In the meantime, as agricultural trade plays an increasingly important role in balancing China-US trade, "large State-owned companies will continue importing from the US because of political reasons", Ma added.


Bakhmatyuk, citing industry forecasts, said China's corn imports were expected to surge to 10 million to 15 million tonnes over the next five to seven years, which means "an attractive market for Ukrainian corn".


But Chinese agricultural experts believe this figure exaggerates the demand by overlooking the government's efforts to boost corn production.


"China's corn production has been stagnant for the last few years. That's why surging demand has recently driven up the import volume at such an alarming pace," said Zhang Shihuang, professor of the Institute of Crop Science at the Chinese Academy of Agricultural Sciences.


Governments at all levels, especially those in China's major food growing areas, have implemented measures to expand cornfield acreages in recent years, which was likely to boost production, he said.


"Even in the worst scenario, China's corn imports over the next five years will stay below five million tonnes," Zhang added.


China signed an agreement in March to import four million tonnes of corn from Argentina.

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