China's COFCO Corp is in talks to sell a small cargo of corn to Japanese trading house Mitsubishi Corp, two sources said on Friday, rare foreign sale of grain from the world's No 2 producer. The state-controlled Chinese company is in discussions to sell at least 15,000 tonnes of corn to Japan, one source briefed on the deal said. A US grains trader who had spoken with the buyer said the shipment could be closer to 23,000 tonnes.
Both sources declined to be identified as they are not authorized to speak to the press. Delivery was expected at the end of February, the first source said. A Mitsubishi spokesman said the company is considering buying corn from other countries, including China, as an emergency measure, but it has not yet made any purchase. A spokesman for COFCO could not be reached by phone and did not respond to an email seeking comment. The deal is the latest sign that lengthy delays in shipments from the northwestern United States, Japan's main corn supplier, were disrupting established trade flows. Feedmakers in Japan, the world's top corn importer, are expected to tap emergency stockpiles as inventories decline to critically low levels.
CHINA CORN GLUT Beijing has been intensifying efforts to tackle a massive glut of grain. It is not known if this relatively small shipment is just a one-off. China last exported significant volumes of corn in 2006/07, when it sold almost 5 million tonnes. Any sign that China is preparing to ramp up corn exports in more sizeable volumes would unnerve a saturated global market, where the United States and Brazil are the world's top exporters.
COFCO would need to obtain a government permit to export before the shipment could leave China. No export permits have been issued yet this year, the source briefed on the matter said. "I think it's a trial, but let's see where it goes," said a Singapore-based trader. China's state planner, the National Development and Reform Commission (NDRC), did not respond to requests for comment.
Japanese trading houses such as Mitsubishi fulfill a quasi-national role by importing everything from oil to corn to sustain the country's resource-poor economy. The country buys other agricultural products from China - it was the top foreign buyer of Chinese soymeal last year, accounting for two-thirds of the 1.9 million tonnes in sales abroad.
Other countries that could fill the shortfall would include Australia, Russia and Ukraine. The Chinese government gave permits to at least two companies, including COFCO, to sell about 2 million tonnes of corn abroad, trading sources said in September, the first approval for bulk exports in a decade.
Those permits were returned to the government at the end of 2016 as they had not been used, said the source briefed on the deal. China has ramped up efforts to get rid of its glut of grain, which is large enough to feed the country for one year. Its proximity to some of the world's top importers would allow it to compete with America and Brazil with lower freight costs and speedier delivery time.