UPDATE 3-China mills eye more U.S. corn after 6 cargoes-trade – RTRS
(Adds China confirmation, quotas)
- Private importers buy 6 cargoes for May/June PNW shipment
- Imports at discount to domestic prices
- Mills seen to buy altogether 1.3 mln-1.5 mln T -analyst
By Karl Plume and Niu Shuping
CHICAGO/BEIJING, March 29 (Reuters) – Private Chinese importers have bought six cargoes, or about 360,000 tonnes, of U.S. corn for shipment in May and June from the U.S. Pacific Northwest in the first large sale to the country since late February, trade sources said.
The latest purchases, together with 120,000 tonnes in February, have swelled imports this year by China, the world’s second largest consumer, to nearly 500,000 tonnes.
“There are another 4 or 5 cargoes which are about to be signed and we expect feed mills to buy between 1.3 million and 1.5 million tonnes at least for the year,” said Li Qiang, chief analyst with Shanghai-based JC Intelligence (JCI) Co. Ltd.
The latest purchases were made from multiple sellers at prices in the low $320s per tonne, including cost and freight, the trade sources said, but declined to comment on which grain companies were involved.
China, historically self-sufficient in corn, has become a large importer in recent years as demand has outpaced its domestic production.
PURCHASES OF FIVE CARGOES CONFIRMED
China has allocated 2.16 million tonnes of corn import quotas to private buyers, 30 percent of a total of 7.2 million tonnes for the whole of 2012 under its commitments as a member of the Word Trade Organisation (WTO).
Official think-tank the China National Grain and Oils Information Center (CNGOIC), confirmed purchases of 5 cargoes this week by southern feed mills, saying the U.S. corn after import duty has a price advantage of 150 yuan ($23.79) per tonne over domestic prices at Shenzhen in the south.
JCI’s Li said some feed mills allocated import quotas smaller than a full panamax cargo load of 55,000 to 60,000 tonnes, are combining quotas together to make full loads.
“The domestic corn supply is pretty tight, particularly of good quality corn from the northeast,” said one trading manager with a major feed mill in southern Guangdong.
“The corn quality in northern areas is not good and there is a risk in using the corn for feed production.”
Corn in some northern areas, which supply more than a third of China’s total corn output, was hit by excessive rains last year during harvest.
“There will be another 3 cargoes of imports, future import volume might not jump too much,” one trading executive with a major feed mill in northern Shandong, whose company bought two U.S. corn cargoes in February at $310 per tonne, told Reuters.
Imports under China’s tariff rate quota system are charged a 1 percent duty and non-government buyers are charged an additional 13 percent value added tax.
China has imported around 1 million tonnes of U.S. corn in each of the past two September-to-August marketing years.
Through mid-March, China had booked 3.8 million tonnes in U.S. corn purchases for shipment in the 2011/12 marketing year, according to U.S. Department of Agriculture data.
This week’s purchases would carry that total above the USDA’s latest forecast of 4 million tonnes for 2011/12 imports by China. Several private forecasts have called for even larger imports.
“We’ve already started factoring in that USDA is at least 1 million tonnes too low on their forecast for Chinese corn imports,” said Citigroup analyst Terry Reilly, citing large sales on the books and expectations for further buying.
“Importing corn into southern China has proven to be lucrative to both private and government buyers,” he said.
Corn futures Cc1 on the Chicago Board of Trade declined on Wednesday despite widespread talk of the large sale to China as traders were squaring positions and liquidating longs ahead of a U.S. government report on prospective plantings and quarterly stocks on Friday.
Rumors of Chinese buying have fueled strong futures market rallies in the past, but traders said selling pressure on Wednesday more than offset news of the sales.
The benchmark May delivery contract CK2 has dropped 4 percent so far this week and closed Wednesday down 1.7 percent at $6.20-1/4 per bushel.
($1=6.3060 Chinese yuan)