Expectations of more huge sales of US corn to China received a twin challenge on Monday from a plan to sell state wheat reserves for animal feed use and a comment from a government official that there were no imminent plans to cut tariffs to encourage farm imports.
China turned into a major buyer of US corn last year, having largely stayed out of the market for more than a decade, and many traders expect it to buy more in 2011 to fill the gap between its own production and the massive demand for animal feed and processed corn products. That theory gained traction on Friday when the US Department of Agriculture reported its sixth-largest single-day corn sale ever, with 1.25 million tonnes going to an unspecified buyer.
But China is seeking to meet some corn demand by releasing state reserves of wheat whose quality has been downgraded and is fit for use in animal feed production, marking the first such sale of wheat reserves to feed mills, analysts said on Monday.
“The feed wheat sales, coupled with corn imports seen totalling between 3-4 million tonnes, are likely to offset corn supply pressure,” said Li Qiang, a senior analyst with Shanghai JC Intelligence Co Ltd (JCI), adding that total feed wheat sales by the government would be 1.64 million tonnes. Beijing will offer a first batch of 300,000 tonnes of feed wheat on Tuesday, according to an official announcement posted on an industry web site (www.grainmarket.com.cn). In addition, state corn reserves totalling 120 million tonnes and food-grade wheat of 683,000 tonnes would be offered as well.
Qualified feed mills are required to bid for the state corn and feed wheat with a total volume not larger than their 30-day consumption, according to the bidding document. The feed-wheat sales come after Dalian corn prices hit their highest level last month amid anticipation of corn shortages at home and low state reserves as Beijing tries to tame food price rises. Analysts estimated that state corn reserves have fallen below a one-month consumption level, or 10 million tonnes.
China is also expected to help meet demand by cutting taxes on imports on a range of goods including agricultural commodities, sources told Reuters in February and a vice minister of commerce confirmed earlier this month.
