Spiralling corn prices in China, after a poor harvest and government stockpiling, could see major imports from the world's most populous nation for the first time in four years. Feed millers are in talks with suppliers and some may be close to signing deals, analysts and traders said, adding that any purchases would strengthen benchmark Chicago Board of Trade futures as Chinese imports would bring much needed fresh demand to amply supplied global market.
CBOT corn jumped 3 percent on Wednesday after talk of Chinese purchases surfaced, but is still down 15 percent on the year. China's animal feed industry, one of the largest in the world, is likely to buy corn from the United States and South America, although the government will keep tight control over shipments through rigid quarantine standards and import quotas.
Prices are completely in favour of imports, with US corn costing around $240-$245 a tonne, including cost and freight into China, compared with $284 quoted in the domestic market. As well as a poor harvest, China's domestic price rise was driven by Beijing's policy of offering subsidies to state firms and feed mills to buy corn in the north-east, aiming to help rural farmers boost incomes.
Output of corn in China, the world's 2nd largest producer and consumer after the United States, was estimated at 138 million tonnes in 2009, according to Shanghai JC Intelligence, down from the previous year's 165 million tonnes because of drought in major growing areas in the north-east. This could drag down China's closing stocks to around 49 million tonnes at the end of this year, from 53 million tonnes last year.