China's Corn Demand Climbs on Meat Consumption, New Hope Says

New Hope Group Co., China’s biggest maker of livestock feed, said rising output of meat, dairy and eggs will boost demand for corn this year, draining stockpiles.

“Grain supply, especially feed grain, is tightening” because of demand from livestock farmers as a drought in northern regions hurts crops, Chairman Liu Yonghao said in Beijing March 8. The government should encourage imports of other feed ingredients such as distillers’ grain, he said.

China is the world’s second-biggest corn user. Rising incomes among its 1.3 billion people are improving diets and spurring demand for meat and dairy products as consumers move away from starch-based food. Increasing grain demand has pushed up prices and helped drive world food costs to a record as measured by the United Nations.

“We may experience a little trouble this year containing costs of raw materials,” Liu said in an interview at the National People’s Congress. “We’ll boost imports appropriately when international grain prices become cheaper.”

New Hope will probably use an additional 1.5 million metric tons of corn this year, Liu said. The group consumed 14 million tons in 2010, or the equivalent of about 8 percent of national production estimated at 172.5 million tons by the China National Grain & Oils Information Center. The country imported 1.6 million tons last year, the most in about 14 years.

Feed Options

State stockpiles of corn have declined after the country sold 27.5 million tons last year to curb prices that gained 25 percent. The government should limit industrial uses to ensure supplies for livestock, Bao Kexin, president of reserve manager China Grain Reserves Corp., said in interview March 6.

Gao Hongbin, vice minister of agriculture, said March 8 it’s too early to determine whether the country has enough corn to meet demand and the government would know toward the yearend.

The chances of China importing corn now are “very low” as world prices are much higher than in China, New Hope’s Liu said.

The government should allow imports of alternative feed ingredients, Liu said. China in December said it would begin an antidumping probe on U.S. dried distillers’ grains, a byproduct of corn-based ethanol commonly known as DDGS, spurring speculation it may impose an additional tariff on imports.

“Using DDGS is obviously a way to ease corn demand, so we should treat the antidumping investigation cautiously,” Liu said. “To reduce pressure on grain supply, I propose we increase imports of the ingredient.”

(Source: http://www.bloomberg.com/news/2011-03-10/china-s-corn-demand-climbs-on-meat-consumption-new-hope-says.html)