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China’s Grain Imports Seen Surging as Global Crop Prices Decline

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July 5 (Bloomberg) -- Grain imports by China, the biggest consumer, are on course to surpass last year as a slump in global prices encourages purchases even as farmers across the country prepare to increase harvests for a 10th straight year.

Inbound shipments of wheat, corn and rice are projected to rise, while domestic corn and rice output expands and wheat remains in line with last year or falls, according to estimates from state and private forecasters in China and the U.S.

Chinese purchases benefit growers of corn and wheat from the U.S. to Argentina and Ukraine, while Thailand supplies premium rice and coarser varieties of the Asian staple are shipped from Vietnam and Pakistan. Wheat and corn futures slumped more than 20 percent in Chicago the last 12 months while Thai white rice, the regional benchmark, fell 14 percent.

“Imported grains are cheap and some local crops like wheat, which has had issues with quality, are struggling to compete,” Li Qiang, chairman of Shanghai JC Intelligence Co., said by phone today during a crop tour of central Henan province. “It’s conceivable we’ll get a record in combined imports of all grains this year.”

China will buy 4 million metric tons of wheat in the year that began June 1, the most in nine years, while corn imports will rise 67 percent to 5 million tons, the U.S. Department of Agriculture said July 3. Corn purchases in the 12 months starting Oct. 1 may rise to a record 7 million tons, according to a Bloomberg survey last month.

Rising labor costs and policies to boost local prices to aid farming incomes have made Chinese crops less competitive, said Li.

Wheat Output

Wheat output will increase for a 10th year, according to a June 28 report by the Ministry of Agriculture in Beijing. The harvest may match last year’s 120.6 million tons, the state-owned China National Grain & Oils Information Center said on June 13, while private researchers including Ma Wenfeng at Beijing Orient Agribusiness Consultant Ltd. projected declines.

Wheat imported under government-issued low-tariff quotas costs about 2,100 yuan ($343) a ton, compared with a domestic price of about 2,400 yuan, according to Shanghai JC.

Wheat for September delivery in Chicago closed at $6.65 a bushel on July 3 after the USDA reported China bought 360,000 tons of the grain from America. Corn futures ended at $5.0275 a bushel and Thai white rice closed at $524 a ton.

Profits from importing corn under official quotas are about 400 yuan a ton, researcher Grain.gov.cn said July 3. Private companies bought three cargoes of new-crop U.S. corn in the last two weeks, bringing shipments for the year beginning Oct. 1 to 4.5 million tons, it said.

Corn Shipments

Argentina, the world’s second-biggest corn exporter, shipped 60,000 tons to China last month, Agriculture Minister Norberto Yauhar said June 12. That would be the first after the two nations signed a quarantine agreement last year.

Rice imports may exceed last year’s record, said Ma at Beijing Orient. Rice purchased from Vietnam, including import costs, is 25 percent cheaper than domestic supplies, he said.

Global grain output, excluding, rice may climb to 1.92 billion tons from an estimated 1.78 billion tons in 2012-2013, the International Grains Council said July 1. Rice production is seen rising to 476 million tons from 470 million tons, the council forecast.

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

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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