China turns to U.S. for corn supplies

Share

After several years of supplying corn to its neighbours, China has quietly started importing large amounts of the food staple in an effort to compensate for poor growing conditions and meet the rapidly changing appetites of its swelling middle class.

China's state-owned trading house COFCO Co. Ltd. confirmed Wednesday that it has bought six cargo loads of corn from the United States. That purchase came two weeks after COFCO bought two other boatloads of corn and some analysts expect China to buy another seven loads in the next few weeks. The purchases mark the first time in nearly four years that China has imported any corn and even then, in August, 2006, the country bought only one cargo load.

News of the Chinese purchase sent corn prices up on the Chicago Board of Trade. The price for the nearest contract hit $3.85 (U.S.) per bushel Wednesday, the highest price since March 5, before settling back to $3.78. That is still far off the record highs of $7.50 in July, 2008.

Cat:e528746c-3414-401a-b14b-50247e3bdf01Forum:2d13dc33-9921-4d4a-815f-e809277631e4

The total volume of China's purchases so far - roughly 400,000 tonnes- is a fraction of the U.S. corn harvest. But some analysts say more deals are likely and total sales could be as much as four million tonnes.

"This may be the beginning of some opportunities to trade more consistently with China in the corn sphere," Tom Dorr, president of the U.S. Grains Council, which represents corn growers and other farmers, said on a conference call Wednesday. He said he believes as many as 15 cargo loads have been sold to the Chinese recently.

"There are a lot of things underlying this new demand but clearly the Chinese economic growth that has taken place over the last several years has created new demands by their middle class for higher-quality proteins," Mr. Dorr said.

Chinese consumers are demanding more meat, milk and eggs, he added, all of which require corn as a feedstock.

"It does seem to me that underlying all of this is a growing demand for protein that is going to result in increased need for corn," he said.

China is one of the world's largest markets for corn and once bought as much as four million tonnes annually from the U.S. and other countries in the mid-1990s. But the country gradually became self-sufficient in corn and became a net exporter in recent years, shipping production to neighbouring countries including South Korea and Japan.

A drought last year and a wet spring this year have slashed the Chinese corn crop and domestic prices have been soaring. China also does not generally grow the higher-yielding genetically-modified varieties of corn that are common in North America.

Corn's price hike and Chinese shipments come at a good time for American and Canadian corn growers, who have planted massive volumes this year. Corn is the largest crop grown in the U.S., with this year's harvest expected to be a record 13.4 billion bushels.

Ontario and Quebec's corn crops, the largest in Canada, are forecast at about 394 million bushels this year in total, up slightly from last year.

Increased corn demand from China could also benefit companies such as Potash Corp. of Saskatchewan because corn growers use a lot of fertilizer.