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China May Need Record Corn Imports to Bridge Shortage, Yigu Says

China May Need Record Corn Imports to Bridge Shortage, Yigu Says
A farmer takes down dried corn in Hutouyan, Hubei province, China. Photographer: Nelson Ching/Bloomberg

China, the second-biggest corn user, may increase imports to a record in the marketing year starting Sept. 1 as wet weather in its northeast region cut grain quality, according to advisory service Yigu Information Consulting Ltd.

Heavy snow this winter increased moisture content and reduced density, making the grain more susceptible to mold and less suitable for feeding animals, said analyst Zhang Qi. A national shortage of good-quality grain may boost local prices and purchases of U.S. corn to more than 7 million metric tons, near the most allowed under government quotas, he said.

Corn in Chicago has dropped 14 percent after surging to a record in August amid the worst drought since the 1930s. U.S. corn for September delivery traded at a discount to the May contract on expectation of a record harvest later this year. China has ordered 900,000 tons to be delivered after Sept. 1, as rising incomes have increased demand for meat, spurring livestock producers to buy more feed ingredients such as corn.

“We don’t think there’ll be enough good-quality corn to meet feed-mill demand by September,” Zhang said in an interview by phone yesterday from Dalian in northeast China. Surging local prices may prompt private and state-owned traders to buy U.S. corn in the marketing year starting Sept. 1, if the U.S. harvest reaches a record “without natural disasters,” he said.

China bought a record of 5.23 million tons in the marketing year ended Sept. 30, and shipments this year are forecast to fall to 2.5 million tons, according to the U.S. Department of Agriculture.

U.S. Grain

May-delivery corn, the most-active contract on the Chicago Board of Trade, traded at $7.325 per bushel at 7:10 a.m. in Beijing, while the September contract was at $6.015 and the December contract was at $5.695.

U.S. corn shipped to China now costs 2,684 yuan a ton ($11 a bushel) after taxes, according to Shanghai JC Intelligence Co. data. Local supply in the southern city of Shenzhen costs 2,480 yuan, while December shipment from the U.S. costs 2,210 yuan, according to Shanghai JC.

Corn quality in the northeast, the largest shipper to China’s southern provinces, is “at least one grade lower” in quality than the average in the past years, Zhang said.

In northeast Heilongjiang, China’s top producer, the water content this year is 30 percent, compared with 25 percent in the past years, he said.

China may use its entire low-tariff import quotas to meet rising demand amid more expensive local prices, Feng Jilong, general manager at Dalian Beifang International Grain Logistics Co., said on March 21. Corn for delivery in September on the Dalian Commodity Exchange closed at 2,461 yuan a ton yesterday.

As a condition of joining the World Trade Organization, China committed to issuing at least 7.2 million tons of corn-import quotas at low-tariff rates each calendar year, according to the National Development and Reform Commission.

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