China, the world's second biggest corn consumer, is likely to more than triple imports to four million tonnes in the crop year starting October as strong livestock feed demand swallows up a bumper harvest, a Reuters poll showed on Thursday. The import forecast is about one million tonnes lower than what analysts predicted in a Reuters poll in July, which showed China's imports in 2011/12 at 5 million tonnes.
Despite expectations of a bumper harvest, Beijing's plans to release 3.7 million tonnes of corn reserves to cool red-hot prices by November are an indication of its growing appetite for the coarse grain used to fatten up pigs and poultry. China could take advantage of relatively low US prices and stock up from its traditional supplier. But as dry weather hurts the new US corn crop and opening 2011/2012 stocks are seen at an eight-year low, China could look to Argentina, the No 2 supplier, a median poll of 10 traders, analysts and millers showed.
Regardless of where it will buy from, benchmark Chicago corn futures could rally again on any news that China was in the market after fears of a recession triggered a global market rout this week "Most (of the imports) will likely be used to build stocks. China is going to become a corn importer, a sizeable corn importer, and when they make their move it will be large," said John Baize, president of John C. Baize and Associates.
"If you see what they're doing, they've been in Argentina, talking to the Argentinean government about doing agreements on shipping corn from Argentina to China," he added. The median forecast is for China's corn imports to hit four million tonnes in 2011/2012. Estimates from 11 poll respondents ranged from a low of two million tonnes to as high as 9.5 million tonnes.
The Reuters forecast represents a three-fold increase from 1.3 million tonnes seen by the US Department of Agriculture in the current crop year that ends this month. According to China customs data, imports from October last year till this August have already reached over 830,000 tonnes and if last crop year's corn buying trends are any indicator, there is likely to be a bigger-than-usual purchase this October.
As China's domestic corn reserves are seen at less than one month's consumption, traders say Beijing will have to abandon its self-sufficiency policy for grains and import, as US prices are still relatively low. "The deal has already been done and China is just waiting to press the button," said one of the poll respondents with a Singaporean agribusiness firm who does business with China.
Last month, China bought corn mostly from the United States at an average $328.66 a tonne CIF - 46 percent higher than a year ago but just quarter of this year's top average price of $1,218.19 CIF a tonne contracted in March, customs data showed. Corn for December on Chicago extended losses in Asian trade on Thursday to hit a fresh three-month low. The grain has gained 11.5 percent so far this year, compared with declines in soyabeans.
China's corn imports appear to be minuscule compared to the record 182.5 million tonne domestic harvest estimated by official think tank China National Grain and Oils Information Centre (CNGOIC) for 2011. This year's harvest is up nearly 3 percent from a year ago.
"China is not going to see tight corn supply next year as the country is on track to see a big harvest this year," said Feng Lichen, the chief analyst with China Corn who still pegged corn imports at three million tonnes. The bumper harvest just about covers China's consumption, which is set to rise to 181.3 million tonnes on mostly animal feed demand as forecast by an executive with state trader COFCO this month. But there are signs demand could be much more than estimated, with China releasing state corn reserves to temper food prices that jumped an annual 13.4 percent in August, driven up by the cost of eggs and the nation's favourite meat, pork.
"Imports will go up just like the soyabean pattern eight years ago," said an Indonesian miller. China turned into a soyabean importer from the mid-1990s but it was only in the following decade that it became a top buyer as domestic output struggled to sate food and feed demand.
China's soyabean imports have been rising at an annual pace of 4.83 million tonnes over the past five years to the current crop year, data from CGNOIC showed. Corn cargoes could easily follow suit. Last year, China returned to importing corn in earnest after years of blocking foreign grain, citing self-sufficiency, buying a record high of 1.57 million tonnes, up 18 times from the previous year.