Dealings between US corn exporters and potential Chinese buyers have picked up following China's first major purchase of US corn in years, but buyers are cautious about booking more cargoes, the head of the US Grains Council's Beijing office said on Thursday.
"We have a lot of contacts that have expressed interest," said Todd Meyer, the senior director in Beijing for the council, which develops export markets for US corn, barley and other grains.
"There's a lot of reason to be optimistic with the way things have gone so far," he added.
Xiwang Sugar Holdings Co Ltd said last week it bought 50,000 tonnes of genetically modified US corn, after Beijing allowed 100 tonnes to be unloaded and sent to a feedmill. The mill still needs government approval to use the corn, traders said.
Meyer said US corn sales to China will likely remain small following its first major order in years last week, but exports could increase if China's domestic corn prices rise further.
"At current prices, there are people who think it's viable for a small segment of the trade," Meyer said.
China is buying US corn at a time when US plantings are forecast to fall 5 percent this year and demand from ethanol plants is booming. Corn futures at the Chicago Board of Trade recently hit a 10-month high.
China was exporting corn in large quantities as recently as March, competing with the world's top corn exporter, the United States.
But Chinese exports halted in March as domestic corn prices climbed due to strong feed demand. Chinese are eating more milk, meat and eggs and using corn to make alternative fuels such as ethanol.
"Price is the main factor driving this," Meyer said. "There's still plenty of corn."
Importing US corn still involves a fair amount of risk, compared with potential savings, traders and industry sources said.
In the northern province of Shandong, where Xiwang is based, corn prices range from 1360 yuan ($169.50) per tonne to 1420 yuan ($177), according to the China National Grain & Oils Information Centre.
China could buy US corn for $151 to $161 per tonne, including cost and freight, based on recent purchases by South Korea and Taiwan.
Based on those prices, Chinese companies could save $8.50 to $26 a tonne by importing US corn rather than using domestic supplies. However, delays or problems with government approvals could quickly erase savings and cost a company large sums of money.
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