Feed grain | High domestic prices fuelling greater business with U.S. exporters
BEIJING, China (Reuters) — China has added to purchases of the U.S. corn crop that is due to be harvested after September, taking total orders since February to about 600,000 tonnes, traders said.
Private animal feed mills, which had already bought 240,000 tonnes in late February, purchased the additional cargoes in response to relatively high domestic prices in China, the world’s second-largest corn consumer.
Traders said large buyers, such as state-owned COFCO, are holding back from big purchases as they wait for U.S. corn prices to fall further, while Sinograin, the manager of China’s state reserves, may also turn to the United States after its domestic restocking program ends April 30.
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Sinograin is buying only from the domestic market, but it bought more than six million tonnes of U.S. corn in late 2011 and early 2012 to replenish low state reserves.
The Chicago Board of Trade December corn futures contract, which tracks the crop harvested this fall, lost 7.1 percent over the first two months of 2013. It was the second worst winter performance for the new crop contract in a decade.
However, the declines have failed to dent growers’ enthusiasm for planting the feedgrain this spring.
Sinograin has not been restocking at full tilt because domestic prices are hovering above government-set stockpile prices, company president Bao Kexin said.
Beijing has set a price of $347 to $354 per tonne, but physical prices in the northeast recently reached as high as $374 per tonne.
Bao also declined to say whether the company would continue to import corn this year, adding such decisions require government approval. State stockpiles are higher now than last year.
“We expect Sinograin will import again this year if it cannot buy enough at home,” a corn trader said.
“U.S. new corn prices are very cheap and attractive for the company.”
U.S. pre-tax corn prices were about 23 percent below domestic rates in the port city of Shenzhen. Even with import and value-added taxes included, the U.S. new corn price is about 14 percent lower.
New Hope Group, China’s largest producer of animal feed, urged Beijing to issue more corn import quotas to benefit pig breeders and meet rising demand for animal protein as more people move to urban centres.
“For feedgrains of soy and corn, control over imports should be relaxed, or if necessary, more import quotas should be issued or even the quota restriction scrapped,” said Liu Yonghao, chair and founder of the group.
China, the world’s largest soy importer, buys 60 percent of globally traded soybeans.
Traders do not expect Beijing to lift corn quota curbs soon, but the government may be willing to issue more quotas to state-owned firms under its World Trade Organization obligations.
China sets its annual corn import quota at 7.2 million tonnes, 60 percent of which is allocated to state firms. China imported 5.2 million tonnes of corn in 2012, a record, but imports remain only a small part of the total, amounting to two weeks of domestic consumption.
