China Buys Corn for Second Time in Two Weeks to Cool Prices, Traders Say
China, the biggest corn consumer after the U.S., made at least its second purchase of foreign grain in two weeks, two traders with knowledge of the transaction said, as the country seeks to cool local prices.
Cofco Ltd., a state-owned company, bought 300,000 metric tons of U.S. corn last night, the traders said. China bought 115,000 tons for delivery in the year ending Aug. 31, the U.S. Department of Agriculture said April 28. No sales have been reported since then.
China, the world’s fastest growing major economy, is boosting imports as domestic futures advance to the highest level in almost two years because of lower output and planting delays. Sales of close to 3 million tons from stockpiles since April 13 have failed to curb prices, the Securities Times said yesterday. Chicago futures gained 1.5 percent today to the highest level in two months.
“This purchase may only be the beginning and it marks an historical change of China’s corn supply going into a deficit,” Li Qiang, managing director at Shanghai JC Intelligence Co., said by phone from Shanghai today.
The country’s imports may climb to 1.5 million tons this year, Li said. Purchases may increase in the next three to five years, resembling the gain in soybean shipments in recent years, Li said. China is the world’s biggest buyer of the oilseed.
Prices in bellwether Shandong province have surged as much 100 yuan to a record 2,050 yuan ($300) a ton this month, the China National Grain and Oils Information Center said in e- mailed report today. The most active futures contract in Dalian is up 4 percent this year, touching 1,950 yuan on May 10.
China may buy as much as 500,000 tons this year, Jay O’Neil, a consultant to the U.S. Grains Council, said April 29. The last time the country was a net importer was 14 years ago when drought cut crops. China imported 1.48 million tons in the year ended Sept. 30, 1996, down from 4.29 million the year before.
“We expect some corn supply shortages may appear at ports between July and September,” Feng Lichen, manager at Yigu Information Consulting Ltd., said by phone from Jilin. Supply is still available, he said.
The harvest plunged by 13 percent to a four-year low last year because of drought, according to a survey published in November. Production dropped to 144.4 million tons from 165.9 million, based on interviews completed during the harvest in September and October by Geneva-based SGS SA for Bloomberg. The USDA estimates production at 155 million tons.
Cold and rain delayed planting this year, increasing speculation supplies may fall short of demand, Feng said. Rain and stormy weather reduced planting by two weeks in Heilongjiang province, the biggest supplier, the Xinhua News Agency said May 10. Planting around the country is affected, according to the Ministry of Agriculture.
Corn for September delivery on the Dalian Commodity Exchange gained 0.3 percent to 1,941 yuan a ton today, after climbing to 1,950 yuan on May 10, the highest level since at least July 2008. The most active contract has surged 11 percent in the past six months.
July-delivery corn in Chicago advanced to $3.8250 a bushel today. The most active contract has dropped 2.3 percent in the past six months.
“Imports are not a foregone conclusion,” Feng said. The corn may well get rejected on arriving at ports, and the shipments may be rerouted to other countries, he said. “Only when the corn drops on the ground will we count it as imports.”