China could face a corn shorfall of up to seven million tonnes this year, a leading industry analyst said Oct. 21, after sharply cutting his estimate of the coming year’s harvest.
Purchases by the world’s second- largest corn consumer of as much as 1.3 millions tonnes this year, its biggest imports in 15 years, have been a key factor driving corn futures this year.
Li Qiang, pres ident of Shanghai JC Intelligence Co. Ltd., told Reuters he expected China’s corn consumption to grow to 160 million tonnes in 2010-11 from 155 million tonnes in 2009- 10, while production would only reach 153 million tonnes.
That is a downward revision of 5.7 million tonnes for the harvest from JCI’s previous forecast.
Li attributed the lower forecast to early frost in the northeast of China, which may reduce the harvest in the main corn-growing region of the country.
The shortfall in corn supply would be largely met through imports, which Li expects to reach 5.8 million tonnes in 2010- 11. Chinese feed mills would also use more wheat instead of corn to cover the remainder.
Record domestic corn prices, which have contributed to the country’s overall inflation hitting a 23-month high in September, coupled with Beijing’s low state stocks, have led to expectations that China may need to import more U. S. corn.
Li’s forecasts imply China will allow a big expansion of trade, having already allowed the biggest volume of corn shipments into China for 15 years, with 1.3 million tonnes arriving in 2009- 10.
Traders say China’s own state stocks of corn are too low to tame price rises, which may have been an additional factor in Beijing’s surprise interest rate hike earlier this week.
“We do not think U. S. prices are an issue. If there is a supply problem, it makes no sense to worry about prices,” said one trading manager with an international trading house, adding that U. S. corn would be attractive if the Chinese government were to lift the 13 per cent value-added tax to encourage imports.
China’s own harvest is underway, but continuous corn price increases have led many farmers to hoard their crop after harvesting.