July 29, 2011

 

China's 2012 corn imports may hit record on feed demand, restocking

 

 

China may lift corn imports to a record six million tonnes in the year beginning October 1, as demand for feed grows and stockpiles require replenishment.

 

An expected gain in domestic production may not be enough to meet growing demand and restocking of state reserves, said Zhang Qi, an analyst at Dalian-based researcher Yigu Information Consulting Ltd.

 

About half the expected import amount may have already been booked, Zhang said.

 

Corn purchases by China may further drain US inventories, forecast to be at the lowest level since 1996 before the 2012 harvest, and help extend a 75% gain in Chicago futures in the past year. China has sold corn and soy from state reserves in an effort to ease price gains that have pushed inflation to the highest level in three years. Pork prices gained 57% last month.

 

"State reserves may have to seek overseas shipments to meet its stock-building goal, as if they buy domestically that would bid up prices," Zhang said. "We may experience a supply crunch in October-November, as farmers will likely demand higher prices as they know supply is tightening."

 

Zhang's forecast compares with the USDA's estimate of two million tonnes of imports on July 12. Shipments may jump to four million tonnes in the 2011-2012 season, after booking an estimated three million tonnes of the US crop, Rabobank International has said.

 

China may seek to boost annual corn imports from the US, the biggest exporter, to 15 million tonnes over the next few years, Michael Dwyer, director of global policy analysis division at the USDA, said July 27. Imports may reach 1.5 million tonnes in 2010-2011, compared with a record 4.3 million tonnes in 1994-1995, according to USDA data.

 

Consumption in China may surge to a peak by September and October as farmers have been increasing herds to profit from record pork prices, Zhang said.

 

Piglets take three to four months to mature, at which time their consumption rises significantly. As such, there may be a corn supply crunch in October and November, Zhang said.

 

China may use a record 16 million tons of wheat as cheaper substitute for corn in the year beginning June 1, the China National Grain & Oils Information Centre said June 16.

 

The costs of growing this corn this year, including fertilizer, seeds, and herbicide, rose about 15% from a year ago, while labour fees also gained, Zhang said.

 

Output from 2011 harvest, starting around October, may expand 3.8% from a year ago to 164.9 million tonnes, Zhang said, adding that much of the new harvest may not get sold until the Spring Festival in January as farmers dry the grain to fetch better prices.

 

Argentina expects to begin shipping corn to China next year, offering an alternative to US supplies, Argentina's Undersecretary of Agriculture Oscar Solis said July 20. Argentina may have about 20 million tonnes of corn available for export out of nearly 30 million tonnes forecast to be harvested next year, Solis said in an interview in Beijing.