WASHINGTON, D.C. (Reuters) — China has made its first large purchase of U.S. corn in months, and a trade group sees the possibility of mammoth imports by the world’s largest agricultural consumer.
The U.S. Department of Agriculture announced the 900,000 tonne sale by private importers Oct. 13 and said an additional 292,110 tonnes were sold for delivery to “unknown destinations.”
Traders in Chicago said the sales formed part of a reported 1.5 million tonnes booked by China during the week. China reportedly ordered U.S. or Argentine corn.
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It was the second-largest corn sale attributed to China and the seventh-largest sale on USDA records.
Rumours of large sales to China have jolted grain markets twice this year. In March, China was rumoured to be behind a sale of 1.25 million tonnes to an unidentified buyer and in June was believed to be the unidentified buyer of 1.14 million tonnes.
The USDA forecast China corn imports of two million tonnes in the marketing year that opened Sept. 1, but the U.S. Grains Council said China would need to import five to 10 million tonnes of corn during 2011-12.
That volume would be dramatically larger than its annual imports of one million tonnes in the past two years.
China is second to the United States as a corn grower. It is the world’s largest importer of cotton and soybeans and buys half of the soybeans on the world market.
With a growing population experiencing rising incomes, China is producing more meat, from herds fattened on corn. China is expected to become a steady and large importer at some point, analysts say.
The USDA recently forecast a record Chinese corn crop of 182 million tonnes, up five percent from its previous estimate. All the additional corn will be used as feed, said the USDA, resulting in a slight draw-down in Chinese reserves.
The department said the higher forecast was drawn from weather data, crop tours and early forecasts by Chinese officials. The U.S. Grains Council said its estimates of large imports and of a 167 million tonne Chinese crop were based on its own crop tour.
“In spite of the current economic pressures, there is evidence of strong and increasing demand for higher quality protein diets,” said Don Hutchens, executive director of the Nebraska Corn Board, who was on the U.S. Grains Council China tour.
Tom Dorr, president of the U.S. Grains Council, said China’s domestic use of corn has exceeded production in six of the last seven years.
“This is clearly why China has emerged as a buyer of corn,” he said. “If our production estimates are correct, they will once again exceed (production) by approximately 3.5 tonnes.”
Analysts think China will be in the market again when prices dip.
“China’s been buying corn on big price breaks. If we continue to see corn prices drop off, maybe down to the $5.50 (per bushel) level, we could see another massive import tender,” said Terry Reilly, analyst with Citigroup.
Before the latest sales, China had bought 904,000 tonnes of U.S. corn for 2011-12 delivery.
