China, one of the world's biggest corn exporters until it all but halted shipments this year, is considering allowing exports again as weak demand and a bumper harvest risk a domestic glut, traders said on Wednesday.
China's announcement on Wednesday of a raft of export tax rebates including the elimination of a tax on grain exports effective from next month was the latest signal that Beijing was moving to encourage overseas deals, a move that could put more pressure on global corn prices that have halved since July.
But traders said relaxing the rules may not be enough to stir exports, since a sharp drop in freight rates has made US corn cheaper for Asian consumers like South Korea and Japan, while the Chinese government is trying to support domestic prices by buying up some 5 million tonnes for government stocks.
"The government hopes to export some, but right now, it is impossible," said one trading manager with a state-owned trading house. "Even without the export tax, domestic prices are still much higher (than US corn)." Traders said the Finance Ministry was unwilling to offer extra financial support to make up for the price gap even though the country's top planning body, the National Development and Reform Commission, intends to promote exports.
Benchmark Chicago Board of Trade corn fell on Tuesday to its lowest in a year, while the Baltic Exchange's dry freight index, which tracks the price of shipping bulk commodities including grain, has tumbled to a nine-year low. Domestic corn prices were quoted at 1,600 yuan ($234.3) per tonne in Dalian while US corn was sold for $208.9 a tonne to a South Korea buyer last week.
"The relaxation comes too late. We have to wait for opportunities when freight rates rise high enough," said the trader. Beijing had banned exports of the feed grain early in the year, missing the chance to cash in on a spike in US corn prices to a record high over $7 a bushel.
Even Taiwan, to which China has allowed 200,000 tonnes of exports this year, has turned to US corn, leading to a delay of some shipments of high-priced Chinese corn signed earlier, trade sources said. China exported about 30,000 tonnes of corn to Taiwan in October and traders expected shipments could continue until the end of the year.
One saving grace may be the fact that China's corn does not come from genetically modified (GMO) crops, unlike most US corn, an important consideration for many Asian consumers. The premium for non-GMO corn over the modified varieties rose to record highs this year after China withdrew from the market, forcing consumers to re-examine their GMO resistance. South Korea bought GMO corn for food for the first time this year.
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