China May Import More Corn

BEIJING (DTN) -- "Stop buying corn in the market!" was a verbal order the four largest state-owned grain companies received recently from China's central government.

Some corn-processing companies in Jilin province had already received similar instructions in January. More than 70 corn-processing companies in Heilongjiang province also received the same instruction, according to the local traders. Jilin and Heilongjiang are the major corn-producing provinces.

Nationwide inflation had stimulated the escalation in corn prices. Farmers are not in a hurry to sell corn because they expect high prices to be even higher just before harvest of this year's crop. Grain processors and distributors expect the same thing, which is why they want to buy more corn now, especially as international corn prices are climbing.

The Chinese grain reserve system had purchased 36 million tons of corn last year for a temporary reserve, while the total figure sold to the market was 27 million tons. Though the Chinese government does not release an official stock number, those in the market believe that 2010 ending stocks will be very tight.

Despite the tight-stocks situation, "importing corn is not possible right now because of the high import price," said Professor Wu Laping from China Agricultural University. "According to the current FOB price, plus ocean freight, U.S. corn will cost RMB 2700 per ton ($10.44 per bushel), while domestic corn from northeast China only costs RMB 2300 per ton ($8.89 per bushel). This large price difference has forced grain companies to buy more domestic corn and stop importing from the U.S."

China imported 1.5 million tons of corn last year, most of it from the U.S. Imports stopped around September 2010, after China's new corn harvest.

(Source: http://www.kfgo.com/agri-business-news.php?ID=8799)