Home > Special Reports > Corn Futures

Corn Futures Special Report

Corn Imports by China Seen Rising Sevenfold to Record as Demand Increases

Free Corn Futures Trading eGuide

February 22^nd, 2012

Corn Futures - Corn imports by China, the world’s second-largest consumer, may surge sevenfold to a record 28 million metric tons by 2015-2016 as local production fails to keep pace with increased demand, according to INTL FCStone Inc. (INTL)

Imports may gain from 4 million tons in 2011-2012 and reach 13 million tons by 2012-2013, Mike O’Dea, senior risk manager, told a conference in Singapore. The local harvest may reach 187 million tons next year, 6.5 percent less than projected demand, according to a presentation from O’Dea.

The country’s looming structural corn deficit may support prices and boost global food costs. China should increase its agricultural imports to help feed its 1.3 billion people and ease pressure on the environment, a state-affiliated researcher said last year. China needed to maintain reserves of 50 million to 60 million tons to guard against disruptions, O’Dea said.

“We’re projecting a doubling of imports this year, and doubling again next year because they’ve got to maintain that reserve stock,” said O’Dea, who’s been in the grains industry for three decades. The government sold some of its corn stockpiles last year to combat inflation, he said.

Corn futures for delivery in May was unchanged at $6.4125 per bushel on the Chicago Board of Trade at 12:52 p.m. in Singapore. The price has declined 0.8 percent this year. Global ending stockpiles may be 125.3 million tons this year, the lowest level in five years, according to the U.S. Department of Agriculture.

Soybean Trade

“China’s imports of corn will likely grow like the soybean trade, that’s almost a certainty,” said Tommy Xiao, an analyst at Shanghai JC Intelligence Co. The country is the largest buyer of the oilseed, with imports rising more than fivefold in the past decade as local output dropped, according to USDA data.

Demand for food and livestock feed has increased in China as economic growth has lifted incomes, driving an increase in protein consumption. Corn is used to make animal feed, while soybeans are crushed for oil and also used to fatten livestock. Gross domestic product expanded 9.2 percent in 2011.

FCStone’s forecast for an import surge by the most populous nation joins projections from Singapore-based commodity supplier Olam International Ltd. (OLAM) and Cofco Agri-Trading & Logistics Co., a unit of the China’s biggest grain trader. Imports may total 20 million tons by 2015, Olam said in October. Shipments by 2020 may be 20 million tons, Cofco Agri-Trading said the same month.

An increase in agricultural imports could cut the impact of grain and livestock farming on soil and water, and is “nothing to be afraid of,” Hu Bingchuan, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, said in an interview November.

China’s imports of corn may be the “biggest wild card” in the global market in the near term as the country may look to rebuild the state stockpiles, O’Dea said.

Global food costs have declined 10 percent since reaching a record in February 2011, according to a 55-item gauge compiled by the Rome-based Food & Agriculture Organization, a United Nations agency.

 - Glenys Sim in Singapore at Bloomberg.