China corn rejections unlikely to halt trade

Dec 13, 2013
by DTN

—Chinese economist sees delays, not cancellations of U.S. corn purchases

China has rejected nearly 200,000 metric tons of U.S. corn since mid-November because it contained an unapproved biotech variety, said China’s General Administration of Quality Supervision, Inspection and Quarantine.

“This situation has developed a lot of discussion in the market, but it is still not clear how the situation will go in the following months,” said Laping Wu, Professor of Grain Marketing at China’s Agricultural University.

China’s grain buyers are likely to import more corn this year because of the dramatic difference between global corn prices and China’s domestic prices. “As of Dec. 5, the imported corn price is around $304 per ton compared to $406 per ton of domestic corn in south China’s Guangdong Province,” Wu said.

Wu said he thinks there won’t be many cancellations of import purchases. Rather, delivery may be delayed because of the uncertainty of the situation.

In November, China rejected a 60,000-metric-ton cargo of corn because it contained biotech trait MIR 162, also known as Agrisure Viptera, made by Syngenta. Another 120,642 metric tons were rejected in early December for the same reason.

China has approved 25 biotech corn varieties for importing. The MIR 162 variety approval is still being processed, officials with China’s Ministry of Agriculture said at a press conference early in December. The officials said they’re waiting on lab results and additional documentation before approval.

Zhonghua Wang, a market analyst in Beijing, said he thinks China will likely approve the MIR 162 variety at the end of the year or early next year. Speedy approval would help importers’ and exporters’ confidence in trade, he said.

Rejections may support domestic corn prices

The rejections may support domestic corn prices, which would benefit the government purchase program by keeping stockpiles from growing even larger, Wu said.

The Chinese government sets a floor price for corn in the main producing provinces at about $367 per ton. When domestic prices are lower than this floor price, the government will buy all corn available in the market. This season’s purchase program started Nov. 25 and will extend to April 30, 2014.

Wang said he estimates China has 45 million metric tons (about 1.7 billion bushels) of corn in the government storage system now. Any new government purchases would add to the stockpile, he said.

The rejection of imported corn may encourage the local corn processors to buy domestic corn as they worry about the import process, Wang said, supporting domestic prices at levels higher than the government purchase price.

“However, the impact on the domestic price will be limited as China’s domestic corn production is about 215 million tons and imported corn will be only around 5 million metric tons,” Wu said.

China’s corn imports are limited by the import tariff quota the country put in place after joining the Word Trade Organization. China keeps an import tariff quota of 7.2 million tons for corn crop and aims to be 95 percent selfsufficient in domestic corn production. — Lin Tan, DTN China Correspondent