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Commodities

China set to export corn as inventory swells

Japan stands to benefit, but quality and price a concern

TOKYO -- China appears ready to resume corn exports for the first time in around a decade as farmers turn to cheaper sorghum for animal feed and corn stockpiles grow at home.

Beijing granted export permits in September to at least two companies, including state grain concern Cofco. Some 2 million tons are expected to be shipped out for the time being.

Corn is a staple food in China as well as being the main component of animal feed. Demand had been surging over the past decade as more people moved from rural towns to cities and meat consumption increased. Livestock farmers, however, have been turning to cheaper sorghum and barley for feed more recently. Overall demand for feed has also been waning.

The amount of corn grew, and its price surged, under government price supports for farmers. The program was abandoned in October, but the surplus inventory is estimated at 150 million tons to 240 million tons. Another 200 million tons will be harvested this year.

With Chinese corn roughly $30 a ton above international prices, exports had been seen as an unlikely prospect. But the massive stockpile is apparently unsustainable.

"The government is bearing a huge financial burden and apparently wants to unload the inventory," said Nobuyuki Chino, president of Continental Rice. Chinese exports could further depress international prices hovering at the mid-$3 level per bushel amid a record crop in the U.S.

Chinese exports will likely benefit Japan, which relies mainly on imports for corn used in feed and food. Shipments from the U.S., a major grower, take a month to reach Japan, and only large ports can accommodate the 60,000-ton vessels used. Exports from China take just two to three days, and its roughly 3,000-ton vessels can enter smaller ports.

"Our convenience will improve in terms of procurement, so we hope to buy corn from China," said an executive at a leading feed producer in Japan.

The question is price and quality. Picky about quality, Japanese companies are concerned about Chinese corn kept in storage for years. Pricing will matter too, with an official at a trading house saying it will not buy unless Chinese corn is cheaper than its American counterpart. Whether Beijing provides subsidies to make its corn price-competitive internationally will be a focus.

(Nikkei)

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