BEIJING: Tumbling global corn prices have raised the prospect of a pickup in imports by China, the world’s second-largest consumer, as a widening discount to high domestic prices makes full-duty imports more economic.
An increase in imports by China would be a filip for global prices, still languishing not far off a five-year low, although analysts said any initial volumes may be limited given fears of government action to curb shipments.
China allows 7.2 million tonnes of annual corn imports at a 1 percent import tariff, but most goes to large state-owned firms. Private firms typically get only small volumes of quota corn and must buy the rest of their needs from domestic sources.
But global prices have fallen 9 percent this year on a record U.S. crop and demand fears. Chinese domestic prices, propped up by government buying to support farmers, are now so far above the global market that so-called “out-of-quota” imports attracting full duties are looking economic.
Of course we will consider it if the price is cheaper,” said Jin Weidong, chairman of Wellhope Agri-tech, a major feed company, adding that a 100 yuan ($16) margin between imported and domestic prices would be significant.
U.S. No.2 corn was priced last week at about 1,493 yuan a tonne at ports in China’s southern Guangdong province, nearly 1,000 yuan below domestic prices. This put it about 90 yuan cheaper than Chinese corn, even after a 65 percent duty for out-of-quota imports, and analysts say global prices are still weakening.
Out-of-quota imports, however, carry significant risks, said Li Qiang, chairman of consultancy Shanghai JC Intelligence. Although there are currently no restrictions on imports, companies would be nervous this policy could change.
China’s corn stocks are very big. We believe China would increase its out-of-quota import management,” he said.
