August 1, 2011

 

 

The International Grains Council (IGC) Friday (Jul 29) revised upward its projection for China's corn imports in the year to June 30, 2012 to three million tonnes from 1.7 million tonnes this year.

 

The increase in the forecast is significant as there has been widespread speculation in recent months that China may have purchased dozens of cargoes of US corn, with the reports, helping push benchmark US corn futures to record highs.

 

The higher forecast was based on the assumption that local prices do not fall sharply, and on the back of strengthening demand, tight local supplies and high prices, as well as high domestic transportation costs.

 

This would be China's highest corn import volume in 16 years, it said.

 

Still, a recent rise in import prices, as well as a 1% import duty and 13% value-added tax levied on private purchases, have made US corn less competitive for private buyers in southern China, potentially limiting the increase in inbound shipments, it said.

 

Near-month corn futures on the Chicago Board of Trade hit an all-time high of almost US$8.00 a bushel last month, propelled by speculation China had made heavy purchases of US corn from existing stocks and the upcoming harvest that starts in September. Low US inventories also contributed to the rally.

 

Due to the likely higher Chinese demand, the IGC also revised upward its US corn export forecast for 2011-12 by 500,000 tonnes to 49 million tonnes.

 

The IGC left its China corn output forecast for 2011-12 unchanged at 180 million tonnes, up from 177.3 million tonnes this year.

 

China's corn output is on the rise, but is not keeping pace with burgeoning demand, particularly from pork producers, analysts said.

 

Traders said that the IGC forecast may be on the lower side, and imports may be closer to five million tonnes.

 

There are indications that China has already locked in purchases of more than three million tonnes, said a trader with a global commodities trading company in Tokyo.

 

He said that due to rising inflation, the Chinese government is offloading corn reserves into the market, and large-scale imports have become essential to replenish the stockpiles.

 

A steep decline in international prices at the start of July triggered renewed buying interest from China, the IGC said.

 

There is speculation that China may have already secured supplies of around two million tonnes of US corn, it added.