June 30, 2011

 

 

China has bought at least 1.7 million tonnes of US corn in the last four months - including 700,000 tonnes in recent weeks, traders, shipping executives and cargo surveyors said Wednesday (Jun 29).

 

More sales are in the pipeline, and although the figure could not immediately be confirmed, there is speculation that China has made deals for a further 800,000 tonnes, they said.

 

China's purchases are significant because US corn stocks are dwindling and are likely to hit a 15-year low of 18.5 million tonnes by the end of August. China became a net importer of corn in 2010 for the first time in 15 years, and its purchases amid current tight supply could buoy global prices.

 

The executives said all purchases are to replenish government stocks.

 

Traders did not give the exact prices of the deals but said that late last week, when some of the deals were finalised, US corn was offered around US$338 a tonne, cost and freight for shipment to China in September from the Pacific Northwest. Offers for August shipment to China from the US Gulf were around US$342/tonne, C&F.

 

"US corn delivered into Chinese ports is now cheaper than grain in the local markets, but taxes of around 14% for private imports and [the] cost of transporting it to mills are a deterrent," said a Washington-based corn industry executive.

 

However, such pitfalls are not a factor for imports to build state reserves, he noted.

 

Traders said that last week, ex-warehouse corn prices in northern China were around US$357/tonne, while ex-railhead rates in southern China, which is distant from corn-producing regions, were around US$377/tonne.

 

"China is buying when global prices are off highs, and the first such purchase of a little over one million tonnes was some time in March," said an executive familiar with the deals.

 

He said subsequent deals totalling several hundred thousand tonnes were done in the second week of May and then again in the second half of June.

 

Most traders said China bought at least 700,000 tonnes in recent weeks through global trading companies.

 

The pace of China's purchases indicates that imports may hit four million tonnes by the end of the year, said the Washington-based executive.

 

This would be more than double last year's total imports of around 1.6 million tonnes.

 

Traders said China's purchases are all the more significant because it is buying both old- and new-crop US corn, as inventories of the former are already tight.

 

US is world's largest corn exporter and its marketing year ends on August 31 but the upcoming harvest, which has just been planted, will be logistically available for shipment only in November.

 

China's own corn crop should be ready for harvest in October. In the meantime, it needs to replenish depleting stocks amid rising pork prices, a Singapore-based grain trader said.

 

Meanwhile, China sold 169,231 tonnes of state corn reserves in an auction in Anhui province at an average price of RMB1,881 (US$291) per tonne Wednesday, sources reported.

 

The volume of corn sold accounted for 40.11% of that which was auctioned.