Farmers Planting More Corn in China on Increasing Prices May Limit Imports

China, the world’s second-biggest consumer of corn after the U.S., will likely expand planting this year as farmers seek to profit from strengthening prices, according to industry and government researchers.

Planted area in the northeast grain belt may have expanded by as much as 10 percent, said Zhang Qi, analyst at Yigu Information Consulting Ltd., the biggest corn-information website by readership. Acreage will likely grow by 2.1 percent from last year, state-backed Grain.gov.cn said yesterday.

China’s demand for corn will grow faster than supply over the next 10 years, Grain News reported last month, citing Shang Qiangmin, director of the China National Grain & Oils Information Center. Corn in Chicago more than doubled in the past year, climbing to the highest since 2008 as global supplies failed to keep pace with demand, driving up world food costs. Sales of corn and feed wheat from state stockpiles in China limited domestic price gains to 5 percent this year.

“The weather has been pretty good overall for the planting season,” Zhang said by phone from Dalian yesterday, after completing field surveys in the provinces of Liaoning, Jilin and Heilongjiang.

July-delivery corn on the Chicago Board of Trade gained 0.5 percent to $7.525 a bushel at 12:24 p.m. in Singapore. The most- active contract on the Dalian Commodity Exchange rose 0.5 percent to 2,388 yuan ($367) a metric ton. Cash prices surged 14 percent in the past year, reaching a record 2,250 yuan a ton last week.

Switching Crops

Three northeastern provinces known collectively as Dongbei accounted for 29 percent of China’s corn output of 164 million tons in 2009, according to official statistics. The country’s output last year was 177 million tons, preliminary government data show, without giving a regional breakdown.

Corn areas in Liaoning, the southernmost province in Dongbei, expanded by about 2 percent, Zhang said, citing preliminary estimates. In Jilin, China’s third-biggest grower, corn areas grew 5 percent as farmers switched from coarse grains such as lentils and sunflower seeds, Zhao said. Farmers in Heilongjiang, the biggest producer, increased planting by more than 10 percent, he said.

“The warming climate is pushing back early frost and the use of new seeds is helping expand corn regions further north,” Zhang said. Farmers in the three provinces have sold most of last year’s crop, a month earlier than in previous years, as state reserves bought about 8 million tons and demand from traders and biochemical producers surged, Zhang said.

Limiting Use

China is limiting corn use by the biochemical and sweetener industry to ensure sufficient supplies for livestock feed, three people who received a government document on the matter said last month. Processors are barred from buying more corn than they consumed in 2009, they said.

Industrial use may not drop significantly because large processors anticipated government policies and bought supplies early, Ge Huanna, analyst at Wanda Futures Co., said by phone from Jilin on May 16.

China last year imported 1.6 million tons, according to customs data, the most in nearly 14 years, to cover an expected shortfall. In March, China Grain Reserves Corp. ordered about 1 million tons of U.S. corn, spokesman Cheng Bingzhou said by phone last week.

Imports may total 2 million tons in the year to June 30, the United Nations Food & Agriculture Organization said last week. The U.S. Department of Agriculture this month estimated purchases of 1.5 million tons for the marketing year through Sept. 30, while Aisling Analytics Pte on May 12 forecast 10 million tons for the current calendar year.

The growth of industrial corn demand in the past few years has “exceeded imagination,” Shang told a conference, according to the newspaper.

Source: http://www.bloomberg.com/news/2011-05-20/farmers-planting-more-corn-in-china-on-increasing-prices-may-limit-imports.html