China, the world's second-largest corn consumer, may buy more than 1 million metric tons in the next 18 months, the US Grains Council said. That's at least 40 percent more than it bought from the US since April.
"In six to 18 months, the Chinese will undoubtedly take more than a million tons of corn and I wouldn't be surprised to see it be in fact double that amount," as the nation's economic growth boosts demand for meat and feed grains, said Thomas Dorr, president of the council.
China has purchased at least 715,000 tons of corn for delivery by Aug 31, according to US Department of Agriculture data. China, a net corn exporter until last year, hadn't bought any US corn until April, when the USDA announced its purchase of 115,000 tons, the first since at least January 2009, according to the agency's data.
Rising imports by China may help drain excess supply, ending an 8.8 percent slump in Chicago futures this year. The contract for December delivery advanced 0.3 percent to $3.7825 a bushel in Chicago at 3:55 pm Singapore time. China purchased 47,000 tons last year, according to the USDA.
The additional purchases "will have a big impact on the global demand balance for corn," said Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co. "It may help corn for December delivery test the $4 level."
US Inventories
Inventories in the US, the largest supplier, will fall to the lowest level since 2007 on higher demand from ethanol producers, the USDA said June 10. US stockpiles, forecast to account for 57 percent of global exports, may be 1.603 billion bushels on Aug. 31, as the nation uses more of the grain to make ethanol, the USDA said.
The agency also trimmed its world corn inventory at the end of the 2010-2011 year, by 4.5 percent from last month.
"There is evidence that their demand for high-quality proteins is going to require added energy for livestock rations and we believe it's an excellent opportunity for the US to provide those corn supplies as needed," Dorr said in a phone interview from Washington yesterday, referring to China's corn needs. Still, he said "I'm certainly not in a position to definitively say that I know" China's purchasing plans.
The World Bank forecast on June 9 that China's gross domestic product will expand 9.5 percent this year, compared with 3.3 percent for the US and 0.7 percent for the euro region. The Asian nation's demand for corn may grow 2 percent to 159 million tons in the 2010-2011 season, from a year earlier, according to the USDA.
Triple USDA Forecast
China's corn imports may be as much as 3 million tons this year, as it rebuilds stockpiles drained to help cool domestic prices, said Jay O'Neil, an agricultural economist at the International Grains Program of Kansas State University. That's three times the USDA forecast for China's imports.
The area planted to corn in China is at least 2 percent lower than expected "due to abnormal rains, snow and temperatures this spring," the council said on its website last week, citing its crop tour in the northeast.
"We could see imports of close to 2 million to 3 million tons if the crop situation there deteriorates further," O'Neil said in an e-mail Wednesday in response to Bloomberg questions. He raised his estimate for imports from 500,000 tons in April.
Weekly Auctions
China sold about 4.67 million tons of the grain in weekly auctions from April 13 through May 25 to cool domestic prices, according to data compiled by Bloomberg. Corn futures on the Dalian Commodity Exchange rose to a two-year high of 1,984 yuan a ton on May 24 as domestic supplies tightened.
"The market is wondering if the crop outlook will motivate the Chinese government to step in and, via importing, replace domestic reserve corn stocks that have been released and sold recently in an attempt to control inflation," said O'Neil, who advises the council. He traveled to China with the council in March to meet local traders and assess the potential for imports.
Corn stockpiles in China's Heilongjiang and Jilin provinces have slumped more than 15 percent and "supplies show significant signs of degradation," with as much as 30 percent of the grain in some storage facilities affected by mold, the council said last week.
Corn supplies in the northeastern Jilin province, China's top producer, may be facing damage from mold because of high temperatures, Sina.com reported on June 10, citing industry website China Corn.
"Moldy corn can be a problem in stored grain since it is likely" to spread, Mike Callahan, senior director for international operations at the grains council, said in a separate e-mail to Bloomberg. "If the mold spores produce mycotoxins, then this can become a serious issue in certain livestock species like poultry and swine."
Moldy corn can be used if mixed with better quality corn and "the negative effects of certain mycotoxins can be somewhat countered by the use of binding and detoxification products," Callahan said.