Feed mills in China, the second- biggest corn consumer, will probably order more U.S. grain on concern that domestic supply won’t meet demand before the fall harvest, researcher Yigu Information Consulting Ltd. said.
Snow and rain in northern China have increased moisture in farmers’ unsold grain, making it more vulnerable to mold and less suitable as animal feed, said Feng Lichen, the general manager of Yigu, which runs China’s biggest corn information portal. Some mills are securing shipments from the U.S., the biggest exporter, for deliveries later this year using newly issued import permits from the government, as the cost of U.S. corn has dropped, he said.
China’s purchases may help stem an 18 percent decline in Chicago prices from a record in August. The U.S. crop will be an all-time high following the worst drought in seven decades, the U.S. Department of Agriculture said on Feb. 22. Chinese mills bought at least 120,000 metric tons from the U.S. last week, the first purchases this year, two executives with direct knowledge of the matter said on Feb. 22. U.S. corn exporters sold 127,000 tons to unknown buyers last week, the USDA said.
“China’s corn shortage this year may widen to 5 million tons from a previous projection of 2 million tons,” Feng said by phone on Feb. 25 from Dalian in northeastern China, the port city in the country’s biggest corn-growing region. “The crops are just too wet, so as soon as the weather warms up next month, mold will grow,” he said.
The most-active contract on the Chicago Board of Trade has lost 6.9 percent this month and was at $6.93 a bushel at 3:37 p.m. in Beijing.
Traders are quoting prices between 2,220 yuan ($356) and 2,250 yuan a ton for September shipments of U.S. corn, including freight costs, Zhang said. Futures for September delivery closed at 2,433 yuan a ton on the Dalian Commodity Exchange.
The USDA had said on Feb. 9 that China’s harvest in the marketing season from Oct. 1 rose to a record 208 million tons, cutting possible imports to 2.5 million tons from last year’s 5.23 million tons.
Purchases by feed mills may have totaled more than 200,000 tons since last week, Cherry Zhang, an analyst at Shanghai JC Intelligence Co., said Feb. 25. Buyers will proceed cautiously on concern that U.S. prices may drop more, she said.
To contact Bloomberg News staff for this story: William Bi in Beijing at firstname.lastname@example.org
To contact the editor responsible for this story: Brett Miller at email@example.com