BEIJING, (Reuters) — Punishing duties might not be enough to prevent Chinese importers from buying corn at international prices that are vastly cheaper than Chinese-produced corn.
However, analysts said volumes may be limited given fears of government action to curb imports because it is trying to reduce huge stocks that it bought at highly subsidized prices.
China allows 7.2 million tonnes of annual corn imports at a one 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.
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China’s canola tariffs aside, the global oilseed complex has eased to a lower price level and is likely to stay there for now — that is, unless problems develop with crops in the U.S. or South America.
Global prices have fallen nine percent this year. Chinese domestic prices, propped up by government buying, are now so far above the global market that so-called “out-of-quota” imports at heavy duties look economic.
“Of course we will consider it if the price is cheaper,” said Jin Weidong, chairman of Wellhope Agri-tech, a major feed company.
U.S. No.2 corn was priced last week at about US$241 a tonne at southern China ports, nearly $160 below domestic prices.
Even after paying the 65 percent out-of-quota duty, it would still be about $14.50 cheaper than Chinese corn.
Out-of-quota imports, however, carry significant risks, said Li Qiang, chairman of consultancy Shanghai JC Intelligence. Although there are now 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.
China’s state reserves hold a record 150 million tonnes, more than eight months’ consumption.
Beijing wants to lower its reserves but with weak demand at state auctions, it may choose to lower its selling price, which would erode the import margin.
Beijing could also bring in fresh import restrictions on unapproved genetically modified material or other contaminants, said industry participants.
