China's corn imports are likely to tumble by 60 percent in the year to September 2013 as near-record global prices, and a slowdown in consumption, dull the appetite of the world's second largest corn consumer, a Reuters poll showed. A decline in purchases by China will come as a relief to other buyers as global supplies are expected to shrink following a devastating drought across the US grain belt.
China is likely to buy 2.15 million tonnes of corn in 2012/13, while production is seen rising 0.4 percent to 192.6 million tonnes, falling short of official and USDA estimates, according to a Reuters survey of 10 analysts and traders. "US corn prices are much higher than the domestic prices and consumption from corn processors is weak," said Ma Wenfeng, an analyst with Beijing Orient Agri-business Consultant. "Many processors are losing money and running at a low capacity."
China's official estimate of corn production stands at 197 million tonnes, while the USDA is expecting a crop of 200 million tonnes. China has been influencing global corn prices since it emerged from self-sufficiency to become the world's sixth largest importer in 2011/12.
US corn prices have slid 12 percent after hitting a record high of $8.49 a bushel in August amid seasonal pressure from the harvest, but prices are still up almost 50 percent from a low of $5.06-3/4 a bushel before the onset of the US drought in June. Analysts said an increase in plantings across China's north-eastern corn belt has been offset by pest attacks and adverse weather in Liaoning and Jilin provinces, resulting in lower yields. "Although domestic acreage has increased a lot, output growth is limited due to bad weather and pests," said Jenny Chen, an analyst with Shanghai JC Intelligence, which estimated the corn output at 170 million tonnes, the lowest forecast.
"If there is early frost and lower-than-normal temperature later, the output may be even lower." With corn production in the United States, the world's top exporter, estimated to be the smallest in six years, the US Department of Agriculture is forecasting a reduction in global consumption as prices remain elevated. Corn use by exporters, ethanol plants and livestock feeders will drop by 9 percent this marketing year, the USDA said, on top of a 5.5 percent contraction last year. This is the third disappointing corn crop in a row, with US production down by 18 percent from 2009's all time-high.
In China, feed millers have been substituting expensive corn with wheat in order to keep a lid on animal feed costs. Corn is a key ingredient in animal rations in China, the world's top consumer and producer of pork. China's food price cycle is largely driven by pork, the country's staple meat. As livestock producers reduce herds in the face of high prices, consumption of feed grains world-wide is expected to fall.
China, however, will remain a significant importer of corn and other grains in years to come due to its rapidly expanding meat consumption and stagnating output. China has tried to widen its sources of corn supply with an agreement signed with Argentina, the world's second-biggest exporter, in February. Ukraine is also hoping to export corn to China.
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