Bloomberg News

China May Boost Corn Imports to Record on Re-Stocking, Hog Herds

July 29, 2011

July 29 (Bloomberg) -- China, the second-biggest corn consumer, may boost imports of the grain to a record 6 million metric tons in the year beginning Oct. 1 to replenish stockpiles and as demand for feed grows, according to Yigu Information Consulting Ltd.

An expected gain in domestic output may not be enough to meet growing demand and restocking of state reserves, said Zhang Qi, an analyst at the Dalian-based researcher. About half the expected import amount may have already been booked, Zhang said. Yigu runs the biggest corn-information website in China by readership.

Purchases by China may further drain U.S. inventories, forecast to be at the lowest level since 1996 before the 2012 harvest, and help extend a 75 percent gain in Chicago futures in the past year. China has sold corn and soybeans from state reserves in an effort to ease price gains that have pushed inflation to the highest level in three years. Pork prices gained 57 percent last month.

“State reserves may have to seek overseas shipments to meet its stock-building goal, as if they buy domestically that would bid up prices,” Zhang said. “We may experience a supply crunch in October-November, as farmers will likely demand higher prices as they know supply is tightening.”

Zhang’s forecast compares with the U.S. Department of Agriculture’s estimate of 2 million tons of imports on July 12. Shipments may jump to 4 million metric tons in the 2011-2012 season, after booking an estimated 3 million tons of the U.S. crop, Rabobank International has said.

More Imports

China may seek to boost annual corn imports from the U.S., the biggest exporter, to 15 million tons over the next few years, Michael Dwyer, director of global policy analysis division at the USDA, said July 27. Imports may reach 1.5 million tons in 2010-2011, compared with a record 4.3 million tons in 1994-1995, according to USDA data.

Corn for December delivery increased 0.4 percent to $6.8875 a bushel on the Chicago Board of Trade today. Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, USDA data show.

Consumption in China may surge to a peak by September and October as farmers have been increasing herds to profit from record pork prices, Zhang said. Piglets take three to four months to mature, at which time their consumption rises significantly, Zhang said. There may be supply crunch in October and November, he said.

Pork Consumption

Pork prices jumped to a record in the week of July 15 and helped send overall inflation last month to 6.4 percent, the highest since 2008. The gain prompted the government to offer subsidies to hog farmers to boost output. Pork consumption in the world’s most populous nation more than doubled in the past two decades, adding 51 million tons last year, as Chinese incomes climbed, according to the USDA.

Still, a 2.4 percent gain in corn production to a record, may curb an increase in imports, the China National Grain & Oils Information Center said in May. Output is set to advance to 181.5 million metric tons this year from 177.3 million tons in 2010, the center said.

China may use a record 16 million tons of wheat as cheaper substitute for corn in the year beginning June 1, the center said June 16.

The costs of growing this corn this year, including fertilizer, seeds and herbicide, rose about 15 percent from a year ago, while labor fees also gained, Zhang said.

Output from 2011 harvest, starting around October, may expand 3.8 percent from a year ago to 164.9 million tons, Zhang said. Still, much of the new harvest may not get sold until the Spring Festival in January as farmers dry the grain to fetch better prices, Zhang said.

Argentina expects to begin shipping corn to China next year, offering an alternative to U.S. supplies, Undersecretary of Agriculture Oscar Solis said July 20. The country may have about 20 million tons of corn available for export out of nearly 30 million tons forecast to be harvested next year, Solis said in an interview in Beijing.

--William Bi, Editors: Ovais Subhani, Richard Dobson

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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