Food Business News - January 29, 2013 - 20

Market Insight

Chinese imports of
U.S. corn remain a riddle
China has been working to raise record crops, to ﬁnd cheaper substitutes
and to trade with a savvy eye to the best values
Continued from Page 1
projections since China carries large reserves of corn
and continues to increase resources devoted to corn production,” he said, adding that
he sees domestic production
“expanded as newer hybrids
are adopted and as fertilizer
use continues to expand.”
The perennial argument is
that the increasingly prosperous population of China wants
a higher-protein diet and that
means more corn in animal
feed. While the general trend
is true, the dietary preferences
have failed to translate into an
explosion of corn imports from
the United States or any other
nation, U.S. Department of Agriculture data show. Instead,
amounts of China corn imports
from all countries have an irregular pattern of increases and
decreases.
The most recent World Agricultural Supply and Demand
Estimates released Jan. 11 projected total corn imports by
China for 2012-13 at 2 million
tonnes, the same as in December. The data do not break out
how much of that amount originated in the United States, but
it was sure to be the large majority, Dr. Good said.
China was reported to have
imported a total of 0.98 million
tonnes of corn from all sources
in 2010-11. For 2011-12, the
WASDE estimate jumped to

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5.23 million tonnes. But that did
not translate into a firm upward
trajectory.
In August 2012, when the
United States was experiencing
the worst drought in 50 years
and corn prices hovered around
$8 a bu, the August WASDE projected Chinese corn imports fell
to 2 million tonnes from an estimate of 5 million tonnes forecast in July and 7 million tonnes
in June 2012.
That total — 2 million tonnes
— remained in place in the
most recent WASDE and was
viewed as being the majority
U.S. corn.
Experts who follow Chinese
import behavior said a number
of factors, beginning with price,
seem to determine the level of
importation of corn from the
United States as well as from
competing nations.
Rich Nelson, chief strategist
at Allendale, Inc., Chicago, said
China would like to import corn
from Argentina because its
price is 60c a bu cheaper than
U.S. corn. China also is a buyer
of corn from Ukraine, said Rich
Feltes, vice-president of R.J.
O’Brien in Chicago.
“There is nothing to indicate
that China right now will be a
big importer of U.S. corn because our prices are too high,”
he said.
Mr. Feltes added that China
has been keeping a lid on the
cost of its animal feed — where

most of the corn bought or
grown in China ends up — by
substituting cheaper soybean
meal. He said a record amount
of soybean meal has been fed to
swine in China recently.
While Mr. Basse noted that
the price of domestically produced corn in China is about
$9.60 a bu, the Chinese seem to
be eager to provide internally
for the vast majority of the
country’s corn needs. China is
expected to produce 208 million tonnes of corn in 2013, a
record, although some experts
predict a crop size of about 204
million tonnes.
Mr. Nelson said China is doing a “fantastic job” of maximizing its own production of
corn, making advances in seed
technology and insisting its
farmers use the best agronomy
techniques in order to increase
acreage.
It may seem counterintuitive
that China would focus on building a record domestic crop that
commands higher prices rather
than buying cheaper supplies
from abroad. But Mr. Basse said
China “imports corn for political
reasons, not for economic ones,
especially when food inflation
becomes a problem.”
Hog producers in China are
currently operating at negative
margins and cheaper imports
may lower the overall cost of
feed, Mr. Basse said.
What would really indicate

a likely increase in the amount
of Chinese imports of U.S. corn
would be a return to trend line
yields for U.S. growers, which
would pull down prices to the
level of $4 to $4.50 a bu, said
Mr. Basse.
“China is the great governor
of corn demand,” he said. “If
prices go high, China will stand
back, but if prices go lower,
they will step in.”
Even if U.S. corn prices are
only able to decline to the $5-to$6 a bu range, Mr. Feltes said,
he would expect more Chinese
purchases of U.S. grain. But “at
upwards of $7 a bu, it seems expensive,” he said.
Despite the difficulty predicting the future, analysts find it
tempting to forecast a pattern
of increases in corn imports
by China that include supplies
from the United States. Continued growing demand, the probable long-term maxing out of
significant gains in the size of
the Chinese crop and a need
to keep costs under control
appear to make a strong argument for meaningful increases
in corn imports by China.
“By 2018, we expect Chinese
corn imports to be in the range
of 5 to 10 million tonnes,” Mr.
Nelson said. “How much of that
is likely to be from the U.S rather than countries with cheaper
corn remains to be seen.” FBN
— Laura Lloyd
Lloyd@sosland.com

January 29, 2013

Food Business News - January 29, 2013

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