Economy

Rising demand likely to boost corn imports

By Zhou Yan (China Daily)
Updated: 2010-07-27 09:26
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Rising demand likely to boost corn imports

A worker stands in front of sacks of domestically grown corn at Beiliang Port in Dalian. [Adam Dean / Bloomberg]


Nation may increase shipments to 15m tons by 2015 from 1.7m tons

BEIJING - China's corn imports will skyrocket from 1.7 million tons this year, to 5.8 million tons next year and as much as 15 million tons in 2014-2015, the US Grains Council said in a recent report quoting Hanver Li, chairman of Shanghai JC Intelligence Co Ltd.

Industry experts said the nation may soon turn into a net importer as demand is far outstripping production.

"The estimated figure, if accurate, will be the highest in 10 years," said Yang Xiaoyun, an analyst with Shanghai CIFCO (China International Futures Co Ltd).

The US Grains Council said China had in May sought corn shipments of nearly 1 million tons from the United States, the biggest purchase in 14 years. Experts said more purchases are likely.

China remained a net corn exporter until 2009, when its corn output declined by 20 million tons from 2008's total output of 160 million tons, due to a severe drought.

The drop also snapped the consecutive rally in China's corn production for five years.

Corn prices for January delivery on the Dalian Commodity Exchange, driven by the supply deficit, has collectively jumped by 8.8 percent so far this year.

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The whole spot price for corn in China is around $ 280 per ton, compared with the CNF (cost and freight) price of $256 per ton.

"The high prices in China is also a major factor behind the import growth, as buyers can gain more profits through overseas purchases," said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Ltd, which provides consultancy services to the agriculture and food industry.

Demand for corn, particularly from the livestock and processing industries, has also grown rapidly.

"China may become a net importer of corn in five years if the demand continues to grow at such quick levels," said Ge Huanna, an analyst with Wanda Futures Ltd Co.

Consumption of corn by the livestock industry has picked up after a slowdown during the economic slump in 2008. Wholesale pork prices, for instance, rose 6.8 percent from July 5 to 15.65 yuan per kilogram on July 16.

"The pork price hike will, in turn, see more farmers entering the sector, thus, triggering more demand for corn," said Yang.

Even as demand continues to grow, corn output has been hardly able to keep pace. The annual growth rate of China's corn output at 2 to 3 percent is far behind the 10 percent growth in the processing industry, said Ma.

The supply deficit gap is expected to widen in the long term, he said.