China buys US corn on rising domestic prices

 

 

China purchased 115,000 tonnes of US corn this week, its first purchase in nearly four years that confirmed weeks of rumours that the country was seeking foreign supplies to tamp down rising domestic prices.

 

Analysts largely saw the purchase as pushing China into opening its doors to cheap foreign corn at a time of planting delays in the country's major corn area in the northeast.

 

Analysts also noted that if China indeed allowed imports, the country could book up to two million tonnes of US corn for shipment in the current marketing year ending August 31.

 

The USDA said exporters had reported the sale to the department and that the cargoes would be shipped by end of the current marketing year on August 31.

 

CBOT May corn futures rose as much as 4%, outperforming other commodities such as soybeans and wheat that were weighed by Standard & Poor's downgrading of Spain's debt rating.

 

The corn sold to China was expected to be shipped from the Pacific Northwest, the shortest sea route from the US to Asia, at the end of May and was priced between US$230 and US$240 per tonne, on a cost-and-freight basis, traders said.

 

China last purchased corn from the US in the 2006-07 marketing year (Sept-Aug), booking 2,700 tonnes to rank 48 in the list of US corn importers, USDA data showed.

 

China's last major purchase of US corn was in 1998-99 when it booked more than 200,000 tonnes.

 

China's purchase comes at a time when the country has been selling corn from its reserves in a bid to tamp down rising domestic prices, traders and analysts said. China has also been striving for self-sufficiency in the feed grain.

 

The traders and analysts were uncertain about whether there would be further regular purchases from China, or if China would only be buying sporadically and in small quantities to meet needs from its hog and poultry industries as they arise.

 

Meanwhile, US corn was competitively priced for exports and that prices in China were relatively high, analysts said.

 

Traders and analysts said there was speculation in the market that the sale to China could be a "test" to whether China would issue import permits and allow these cargoes to land there as a way to help cool rising domestic prices.

 

The traders said that if China did not allow the 115,000 tonnes of corn to land, the cargoes could easily be diverted to other destinations like Japan and South Korea.

 

One senior export trader said the sale would have been unlikely if the importer had not secured all the necessary approvals from the Chinese government.