SINGAPORE: Strong domestic prices and low reserves are likely to force China to import more US corn this year, squeezing tight world supplies, analysts and industry officials said on Wednesday.
China's corn imports are expected to more than double in the current 2011/12 crop year to 4 million tonnes from 1.5 million a year earlier, a senior official at a state-run company said at an industry conference in Singapore.
Excessive rains in the country's northern corn belt last year reduced the quality of the domestic crop, helping to push Chinese corn prices more than 7 percent higher so far this year.
The benchmark Dalian September contract hit a lifetime high of 2,458 yuan per tonne on Tuesday, making cheaper US corn more economical.Dan Basse, president of Chicago-based consultancy AgResource Co, said he saw China buying in July, when he expects state reserves to start running low.
He forecast US old-crop corn prices to stand between $6.80 and $7.20 per bushel, from around $6.70 per bushel now. Corn prices have risen almost 4 percent so far this year, compared to a nearly 3 percent gain for the whole of 2011.
China is the world's second largest corn consumer and the state agency in charge of grain reserves has said it will not need to import large amounts this year due to a bumper 2011 harvest.
But traders and analysts say China and the influential US agriculture department may have overstated the corn crop by as much as 14 percent, which is likely to keep domestic prices higher and result in more imports.
"Whether we import more or less depends on price spreads. US corn prices are favourable for imports right now," said the Chinese official who declined to be identified as he is not authorised to speak to the media.
"Domestic corn prices are already on the higher side and they are likely to consolidate around current levels."
The United States, however, may not be able to meet all China's needs as the USDA expects domestic corn stocks to shrink this year to their lowest level in 16 years.
Alternative suppliers include Argentina, which recently signed a trade deal with China, but a lower-than-expected harvest is likely to make impossible large volumes of imports, industry officials said.
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