October 27, 2020

 

China to boost its corn imports, becoming global top buyer

 

Industry sources said China's government is looking to issue permits for the import of millions of additional corn through 2021, as livestock feed demand increases, Reuters reported.

 

A new round of import orders will position China as the bigger corn importer in the world for the first time, resulting in higher prices for corn and other grains. This could intensify food inflation, already affected by global supply chain disruptions because of the pandemic.

 

China previously had massive corn reserves but sold them at auctions, leading to higher corn imports. Domestic corn prices reached record levels because of shortages, caused by a typhoon, drought and pest attack on crops.

 

Reuters was informed by sources based in China, as well as a trader from Singapore with import discussions knowledge that Beijing has considered issuing more lower-tariff quotas for buyers, boosting imports by exempting the 65% tariffs that would normally be levied.

 

The sources declined to be identified as they have not been authorised to speak to the media.

 

China's National Development and Reform Commission (NDRC) and China's top grain trader COFCO did not respond to faxes for comment.

 

Terry Reilly, senior analyst at Chicago brokerage Futures International, said China could change the corn landscape globally by becoming a top importer.

 

China usually issues 7.2 million tonnes in low-tariff quotas for corn imports per year, meeting most of annual demand of 280 million tonnes through domestic crops. Its full annual quota has never been used.

 

Analysts project China will need 30 million tonnes, or four times its usual quota, to meet the 2020-2021 October to September crop year.

 

According to a Singapore-based international trading source and two other people with knowledge of the deals, importers in China have already ordered more than double the annual allowance, with 12 million tonnes of corn booked from the Unites States and a further 5 million tonnes from elsewhere, such as Ukraine for the crop year.

 

Beijing had already authorised for COFCO a 5 million tonne special low-tariff quota, which was used for booking US supplies, said one of the sources privy to the trade details.

 

The terms of the additional allowance has COFCO's profit capped at RMB 30 (~US$4.49; RMB 1 = US$0.15) per tonne, with additional windfall channeled towards the state, according to the source, adding that this is because China needs corn and partly because of China's pledge in the US-China Phase 1 trade deal.

 

-      Reuters