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Increasing domestic demand could cut China’s corn exports

Increasing domestic demand could cut China’s corn exports
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First Published: Sat, Mar 24 2007. 02 23 AM IST
Updated: Sat, Mar 24 2007. 02 23 AM IST
Beijing: China, the world’s second-biggest corn producer, may slash exports of the grain by almost half as the livestock sector expands to cater to more meat-based diets and industrial use surges with economic growth.
Corn exports are forecast to fall 44% to 2.5 million tonnes (mt) in 2007/08 from 4.5mt in the current year ending in September, Jiang Jianhua, vice- chairman of Jilin Grain Group Co. said at the China JCI feed conference in Guangzhou on Friday.
Reduced Chinese corn exports will further shrink worldwide supplies that the US department of agriculture expects will drop this year to the lowest since 1978. Corn prices have risen 87% in the past year due to record production of ethanol and global demand for livestock feed.
“If China’s corn exports fall in the coming year, we have no choice but to source the grain from the US or South America,” Lee Young Il, foreign trade department general manager at Nonghyup Feed Inc., South Korea’s second-largest feed corn importer said.
China’s meat production has grown at an average of 4.8% a year for the last five years, boosting livestock feed demand, while the starch and ethanol sectors have grown more than 15% annually in the same period, the US foreign agricultural service said in a report dated 1 March.
“Driven by increased industrial usage and declining stock, domestic supply is becoming tighter and tighter,” Jiang said. The world’s most-populous country is eating more meat as incomes rise with economic growth, which, at 10.7% last year was the fastest in 11 years.
China’s corn production, second only to that of the US, is expected to rise 1.4% to 146mt this year, the China National Grain and Oils Information Center said.
Chinese demand for corn is forecast to rise 2.9% in the year ending September, according to the US department of agriculture. Corn is mostly used for animal feed and as starch in sweeteners, paper-making, textiles and food-processing. High oil prices are also encouraging output of corn-based ethanol.
“The growth of China’s corn processing capacity has been extraordinary in terms of both the rate and the scale,” said Wang Licai, deputy general manager of Yellow Dragon Food Industry Co., a corn-processor in Jilin, the main corn-growing province.
Demand may cut China’s corn stockpiles this year to almost half the level of four years ago, when the country exported 15.2mt, the US department of agriculture said.
Chinese corn exports for the year ending September will be no more than 3.8mt by the end of this month, out of 4.5mt of export quotas issued, Jiang said, adding that the government may not approve further sales. China’s exports go mostly to South Korea and Japan. South Korea bought as much as 6.6 lakh tonnes of corn, mostly from the US or South America, between 28 February and 2 March, saida supplier familiar with the purchases.
“We have not been given any quotas,” Jiang said, commenting on speculation the government may have issued new export quotas. Jilin Grain and China National Cereals, Oils and Foodstuffs Corp. are the only two companies allowed to export grain.
Still, the 2006 harvest may be 10% more than official estimates of 144mt, and another good crop this year, may prompt the governmentto ease export restrictions, Jiang said.
Chinese farmers have been holding back sales hoping for further price rises, as Dalian Commodity Exchange cornfutures soared 21% in the last six months.
“The situation has changed,” Jiang said. Farmers are now rushing to sell corn to prepare for planting next month. Corn plantings are forecast to rise 1% to 27.4 million hectares this year, the Grain and Oils Information Center said.
Jae Hur contributed to this story.
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First Published: Sat, Mar 24 2007. 02 23 AM IST
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