September 18, 2008

China may have to import 10 million tonnes of corn by 2010

China, which is just managing to balance domestic corn supply and demand currently, may see corn imports of 800,000 tonnes next year and as much as 10 million tonnes by 2010, according to an industry analyst.

Strong demand from corn processors, which make corn-based products largely for export, coupled with steady growth in feed demand as meat consumption grows would mean that China would have to increase its corn imports, according to Robert Horster, risk manager with Cargill Investments (China) Ltd.

China effectively halted corn and wheat exports this year to fight domestic inflation. It would normally aim to have up to 2 months of reserves available.

Although this year's corn harvest, estimated at a record 156-158 million tonnes was a 4-6 million tonne increase, increased exports of corn based products would offset most of the increase.  

Yu Zuojiang of COFCO Co Ltd, China's largest grain trader, said a strong corn harvest this year will only keep Chinese exports of corn-based products flat at last year's levels.

Exports of corn-based products were equivalent to the export of 7 million tonnes of corn in 2006, but dropped to 3.82 million tonnes last year after Beijing reined in the corn processing industry by adding a value-added tax and scrapping rebates on exports.

In the near-term, China will remain an exporter of corn-based products, with volumes likely to hold steady, Yu said.

He also said that the 5-percent growth a year until 2012, for China's meat demand would result in heightened demand for corn from the feed industry.

China has avoided corn imports from the world market this year largely because corn was substituted with cheaper feed wheat, as wheat stocks mounted thanks to years of good harvests and an export ban on major grains.