Friday, 14 September 2012

China's 2013 corn imports seen sinking on high global prices

China's corn imports in 2013 may plunge more than 80 percent from this year's estimated purchases, a government think-tank said on Thursday, as soaring global prices and prospects of higher domestic production deter imports. China, the world's second largest consumer, has been influencing global corn prices over the past two years as it emerged from self-sufficiency to become the world's sixth largest importer in 2011/12. 

While US corn prices have climbed to record highs as the worst drought in half a century grips large tracts of farmland in the top exporter of grains, China is on track to produce an all-time high crop of around 197-200 million tonnes this year. China is expected to import 1 million tonnes of corn in 2013, China National Grain and Oils Information Center (CNGOIC) said in a report, which would be the lowest imports of the grain made by the country since 2009. In 2012, China is estimated to buy 5.5 million tonnes. 

"Rising US corn prices have caused some contract cancellations," the center said, adding that most of this year's imports, though much higher than a year ago, were supported by the government's purchases. CNGOIC's estimate of China's 2013 imports is not far from the 2 million tonnes estimated by the US Department of Agriculture in its monthly global demand and supply report on Wednesday. The global trade of corn is around 90 million tonnes. 

"With the rally we have had in global prices since June, it is no longer attractive to ship corn to China," said Victor Thianpiriya, agricultural commodity strategist at ANZ in Singapore. "Looks like they are going to have a reasonable crop, so they are going to have a buffer." Chicago corn prices have surged about 45 percent over the last three months in a drought-fed rally. 

Feed millers in China have been substituting expensive corn with feed wheat in order to keep a lid on rising costs of fattening animals. Corn is a key ingredient in making animal feed in China - the world's top consumer and producer of pork. China's food price cycle is driven in a large part by pork, the country's staple meat. Any increase in food prices is expected to push up inflation, one of China's biggest economic concerns given the potential for rising prices to trigger social unrest. Corn output in China is estimated to rise 2.19 percent in 2012 to 197 million tonnes, CNGOIC said this month, from a year ago. The USDA estimates China's corn output at a record 200 million tonnes. 

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