BEIJING: China has bought around 10 to 12 cargoes of mainly U.S. corn in the past month and is set to step up purchases as a record gap between domestic and international prices encourages buyers to seek out cheap imports, three trade sources said.
Overseas purchases by the world’s second-largest corn consumer had plunged in the second half of last year, after domestic supplies became much cheaper following an overhaul in farm policy.
But healthy demand for animal feed and industrial processing, and concerns over supplies have kept Chinese prices relatively high for much of this year, and a rally in recent weeks has helped to push the spread with Chicago corn prices to a record. “The (import) price is about 300 yuan (or US$45.50) cheaper than domestic corn,” said a China-based trader with an international firm.
Recent deals are for February, March and April arrivals, he said, priced at about 1,530 yuan ($232) a tonne for corn landed in southern Guangdong province.
“It’s so cheap, there will definitely be more,” he said.
“We expect China to buy more cargoes. They will keep buying as they have the quotas and domestic prices are high,” said another trader with an international trading company in Singapore.
Chinese corn prices are being supported by forecasts of a deficit in supply, after Beijing encouraged farmers to plant less of the crop this year to help get rid of ageing reserves.
The Ministry of Agriculture expects output in 2017-18 to fall to 210.1 million tonnes. That would be short of demand by about 4.3 million tonnes.
Global corn production, though, climbed to an all-time high of 1.075 billion tonnes in 2016-17, hitting records in the past two out of three years, according to data from the U.S. Department of Agriculture.
China has imported 2.35 million tonnes of corn in the first 10 months of the year, down 21.5 percent from a year earlier, customs data shows.
The USDA expects China will import three million tonnes in the 2017-18 crop year, up slightly from the 2.46 million tonnes it estimates was imported in the 2016-17 year ended in September.
In China, corn is largely used for feeding the world’s biggest herd of pigs.
