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Chinese corn imports forecast to soar
By Javier Blas
Published: February 4 2011 11:34 | Last updated: February 4 2011 11:34
Corn prices – and with them, the price of meat – are set to explode if the
latest import estimates from China are correct.
Last year, Beijing recorded its largest imports of corn since its disastrous
crop of 1995-96. But this year could see further record buying. The US
Grain Council, the industry body, said late on Thursday that it has received
information pointing to Chinese imports as high as 9m tonnes in 2011-12, up
from 1.3m in 2010-11.
EDITOR’S CHOICE
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If true, it means that the corn market is a lot tighter than even the most
bullish traders imagine. The US Department of Agriculture, which compiles
benchmark estimates of supply, demand and stocks, forecast Chinese imports
at just 1m tonnes in 2011-12.
The most China has imported in modern history is 4.3m tonnes in 1994-95 and
3m tonnes in 1978-79. For most of the past 50 years, Beijing has been
largely absent from the international market, as domestic production was
enough to meet demand.
But Terry Vinduska, the chairman of the council, said after visiting China
that “estimates given to us were that China is short of 10m-15m tonnes in
stocks and will need to purchase corn this year”. He pointed to about 9m
tonnes in imports. “We learned the government normally keeps stocks at 30
per cent but they are currently a little over 5 per cent, which may lead to
imports of 3m-9m tonnes.”
Last year, China’s corn production suffered because of a drought. At the
same time, the country’s demand is rising fast as the population consumes
more meat.
It is not the first warning of forthcoming massive imports. Recently, David
C. Nelson, at Rabobank, one of the world’s largest lenders to the global
agribusiness industry, warned that because China’s animal protein industry
is so large, the order of magnitude of China shifting to become a net
importer of corn could possibly be measured in tens of millions of tonnes,
and in just a few years time.
“We note that China could become a net importer of 25m tonnes of corn as
early as 2015,” he said. Senior executives at trading houses took note of
Rabobank’s forecast.
A degree of caution must be heeded on the estimates, however. The US Grain
Council did not disclose where it got the information and Chinese food
import policy is erratic. With corn nearly at a record high, the country
could very well opt to further drawdown stocks.
But the forecast of record imports still need to be taken seriously. When
China started to import soyabean back in 1995, few thought the country would
today be buying nearly 60 per cent of all the global trade in soyabean.
Could it happen in corn? Most of the traders I have spoken to believe that
China will become a big corn importer, although none believe it will follow
the same pattern as in soyabean. Even so, 9m tonnes is a huge number. Enough
to push corn prices above the 2007-08 record of nearly $7.65 a bushel. In
early trading on Friday, corn was at $6.65 a bushel.
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