Competitive prices may prompt China to import US corn

 

 

China may import corn from the US as prices are now competitive compared with domestic supplies, according to state-owned China National Grain and Oils Information Centre.

 

Cary Sifferath, the China Senior Director for the US Grains Council in their Beijing office said corn imports into China have 13 percent value added tax and one percent duty for a 14 percent additional charge.

 

Even with that charge added on top of freight to China, US corn is about even to slightly discounted to local Chinese corn into the southern China ports, said Sifferath. Because of that, he said there is a possibility that those who have corn import licenses, especially in the south, are looking at the possibility of importing corn.

 

Sifferath however said China is not short of corn as official harvest last year was 165.5 million tonnes, the largest in history. But the Chinese government is buying large amounts of corn in northeastern China, which is one of the major producing areas. Sifferath says the government purchase aims to increase the corn price at the farmer level to help insure that farmers continue to make money growing corn and other grains, and continue to plant and produce plenty of corn this coming year.

 

For this reason, there has been a price spread between corn price within China and what corn is actually doing in the world market, Sifferath said. US corn is slightly discounted against southern China's varieties.

 

Southern China is a corn deficit area that has to bring corn in from northern China anyway, and because of that feed companies in southern China are looking at the possibility of importing corn. To do that, the companies would have to have received a corn import quota from the government earlier in 2009, which there are some companies that have done so and have quotas in hand.

 

Sifferath notes that while major feed millers in the area are nervous in importing corn, the government could try and use biotechnology or other quarantine or inspections issues to try and delay the unloading or clearing of customs. He suggests to delay the unloading for 20 or 30 days which would add a lot of cost onto the landed corn price or they could possibly try to deny the entry of the corn altogether.

 

Because the government is trying to hold corn prices high, Sifferath says an even bigger price spread might be needed for someone to look at importing corn. He says in May the Chinese government will begin auctioning off the corn they purchased back into the market.

 

If they were to auction it back at a price high enough to cover their purchasing price, Sifferath said drying costs, storage costs and other things would push higher prices for Southern China corn. This can push feed companies to look towards importing.

 

On the other hand if they sell it back at a discount into southern China to give some relief to corn prices then there may not be as much of an incentive to import corn.

 

For the next few months, Sifferath said some US corn will be sold into China and at the same time might not see any. But the next 30 days would be crucial as to what the corn price does domestically and the element for domestic corn prices throughout the summer to see if China will actually try and import, he concludes.