News 216 views last update:6 Aug 2012

US gets a foothold on Chinese corn market

Last week China made it second purchase of US corn in as many weeks. Further purchases are expected in the near future.

The state-owned company Cofco Limited bought 300,000 metric tons of US corn last week Tuesday.
According to US Grains Council President and CEO Thomas Dorr, it’s possible as many as 15 US cargoes (825,000 to 900,000 tonnes) has been sold to the Chinese.
“If this is true, and we certainly hope it is and view it as good news, this may be the beginning of opportunities to trade more consistently with China,” said Dorr.
Dorr said there are a number of issues underlying this new demand. “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 that is going to result in increased need for corn.
Harvest down
“We also, generally speaking, are aware that the crop last year did suffer from drought in China and we know that it has been a cool and wet spring. Because they don’t have access to biotechnology hybrids that we have in the United States, the likelihood of their production being down this year has also been enhanced,” said Dorr.
It all adds up to the possibility of a big market opportunity, which Dorr says is encouraging news for US corn growers.
“The 7.2 million TRQ (trade rate quota) that was released in March suggests that 60% of that would go to the state, which would be in the neighbourhood of 4 million tonnes, the balance to the private sector. Depending on how they deal with the VAT (value-added tax) and the subsequent corn price spreads, it gives you some sense of what the potential top end might be. But to suggest that the Council knows if they’re going to take it all or not I think is probably not prudent,” he said.
Competitive advantage
Currently, Dorr says the United States has a competitive advantage for a couple of reasons. “Number one, price. Number two, the United States has done far more work than anyone else relative to securing the approval of a number of genetically modified events.
“So consequently, we think the transparency of our regulatory and our biotech community is superior to our competitors and that, we believe, will give us an edge, at least for the time being,” he said.
The U.S. Grains Council isn’t alone in thinking this may be the beginning of things to come. Some reports out of China indicate that the country’s imports may climb to 1.5 million tonnes of corn this year.

Dick Ziggers

Or register to be able to comment.