July 13, 2011

 

China purchases 3.7 million tonnes of US corn to date
 

 

China has bought 3.7 million tonnes of corn from the US so far this year, with sales for the full year likely to reach five million tonnes, an executive with a major state-owned grain trading company said Tuesday (Jul 12).

 

Such a volume would dwarf last year's 1.6 million tonnes of corn imports and mark the second consecutive year China has reversed its net trading position in corn to set it on course for record corn import volumes in 2011.

 

Driven by low stockpiles and soaring meat demand, China's purchases lifted prices last week after the USDA disclosed that the Asian giant had bought 540,000 tonnes for delivery after August, exceeding the USDA's earlier 500,000-tonne estimate for the full year.

 

China's total corn imports for the year will likely use up 70-80% of the government's annual tariff-rate quota of 7.4 million tonnes, analysts said.

 

"The volume of corn purchased in the second half is likely to be no less than the amount bought in the first half, which was about two million tonnes," experts said.

 

In the last few weeks alone, China imported 1.2 million to 1.6 million tonnes, according to sources.

 

However, China is unlikely to breach its import quota, which sets higher tariff rates for purchases outside the cap, which is part of a system of controls aimed at self-sufficiency in grain supply.

 

"Ten million tonnes [of corn imports] would likely be too high as it would exceed the quota," analysts said.

 

Even if China imports five million tonnes for the full year, it would be more than its last record corn import volume of 4.29 million tonnes, reached in 1995.

 

The USDA reported last week that an additional 1.4 million tonnes of corn purchases were headed for "unknown destinations," widely believed to be China.

 

China's corn purchases are closely watched because they are a narrative of large shifts in the global food trade, as the world's second-largest corn consumer runs low on arable land amid soaring domestic demand.

 

China became a net corn importer only last year, after 15 years of net exports. Its feed industry continues to grow at nearly 10% a year. Pork prices have been in an uptrend since March 2010, hitting a record RMB23.61 (US$3.65)/kg in mid-June.

 

Analysts, including Rabobank Group, have forecast that China could become the world's largest corn importer in five years. In 2009, China was not even among the top 10 corn importers globally.

 

Even as they downplayed grain purchases, some agriculture policy officials have been hinting that China may not be able to meet sharply rising food demand through domestic resources alone.

 

"We have to raise output in this area but our techniques and resources can't keep up," Chen Xiwen, director of the State Council's executive office on rural policy and director of the ruling Communist Party's rural affairs office, said in March.

 

While stocks of other major grain categories, including wheat and rice, remained among the world's largest, China's corn stockpiles have been running low because the government has been releasing stocks to rein in inflation.

 

The country's stocks-to-use ratio for corn, an indicator of how much supply China held in store as a proportion of its consumption, was around 35.7% in 2010-11, down sharply from 85% in 2000-01, Standard Chartered said.

 

In another departure from past policy, China's corn purchases this year have so far been directly handled by its official stockpiling agency, China Grain Reserves Corp, known as Sinograin, the grain trading executive said.

 

"Sinograin is now directly dealing with US exporters," the executive said.

 

China is the US's top agricultural export market. Unlike its broader trade patterns, China usually runs a trade deficit with the US in the agriculture sector, importing $17.5 billion a year on average, compared with $3 billion a year in Chinese agriculture-related exports to the U.S.

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