Cofco Executive Says It Hasn't Won More Corn Quotas, No Purchases Planned
Cofco Ltd., China’s top state-owned grain trader, hasn’t been given any corn import quotas on top of the 500,000 tons already granted, a company executive said, even as speculation persists over new purchases.
The company, which ordered eight cargoes since April, isn’t planning to buy more now, said the executive, who declined to be identified as he is not authorized to speak publicly.
China, the second-biggest corn consumer, has bought U.S. corn and sold inventories to cool local prices that have climbed 11 percent in the past six months to near record levels. The country may have issued a new round of import permits, according to independent researcher Shanghai JC Intelligence Co. Corn in Chicago jumped as much as 2.1 percent yesterday.
“While we can’t confirm more quotas have been issued, we believe more are likely” because the government will use imports as a way to curb prices, said Yu Xiaomeng, analyst at research firm Beijing Shennong Net. “Looking into next year, it’s hard to see the supply situation easing greatly.”
The country’s demand may outstrip supply by as much as 10 million tons in the year through Sept. 30, which may be met by releasing stockpiles or additional imports, Li Qiang, managing director of Shanghai JC, said by phone from Shanghai yesterday.
The nation has ordered almost 1 million tons and will probably buy more, Alvaro Cordero, manager of international operations-marketing at the U.S. Grains Council, said in an interview May 24. That would be the biggest purchase in 14 years. A reduced crop last year and planting delays have spurred speculation of shortages.
Cofco, the only government-directed firm engaged in corn imports, hasn’t received any indication the government wants more shipments, the executive said. Whether there are more imports depends on policy makers and the weather, he said.
The country will probably produce 166 million tons of corn in the 2010-2011 year, up from 155 million tons the previous year and compared with 165.9 million tons in 2008-2009, according to the U.S. Department of Agriculture. China’s corn harvest last year may have fallen 20 million tons from the year before on drought, according to Shanghai JC’s Li.
The nation has “more than enough” corn to meet demand, with just a third of inventories ample to cover current consumption, Zeng Liying, deputy director of the State Administration of Grain, said this week. Prices have been driven by speculation and do not reflect fundamental supply and demand, said Zeng, who spoke in Beijing.
Traders in major producing regions, the so-called Dongbei, or the Northeast, have bought almost all the 4.7 million tons offered in six rounds of auctions from temporary state reserves, according to Bloomberg calculations based on data provided by the National Grain & Oil Trade Center.
Even as the government requires all the participants in these auctions to be feed makers, many are just “traders in disguise,” Feng Lichen, manager at Yigu Information Consulting Ltd., said in telephone interview yesterday.
The government offers a 70 yuan per ton subsidy on shipping corn, which ends on June 30, the Cofco executive said. Suppliers in the north are rushing to get the grain to the south to claim the credit before the deadline, he said.
Feed mills in south China, including the top livestock raiser Guangdong, have more than doubled their inventory levels to at least a month of normal usage from the usual 10 days to 15 days, while the U.S. corn bought by Cofco and other feed mills will begin to arrive by July, he said.