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Opinion: China could return to importing corn

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Corn farmers may soon have something to celebrate – the return of China as an importer.

That's not a given. Official data on Tuesday pegged the country's corn crop within a husk or two of last year's 165.9m-tonne record, leaving more than enough to feed its growing livestock and bioethanol industries and keep stocks above 50m tonnes.

But if analysts at Shanghai-based JC Intelligence (JCI) are right, China will need foreign purchases on a decent scale for the first time for 15 years to avoid leaving itself in a bit of bind.

Consumption factor

It isn't just JCI's lower production estimate, of 145.9m tonnes, which is significant.

Its forecast for demand growing by up to 8%, ahead of other guesses, would give the market an extra squeeze too, inferring corn consumption of more than 164m tonnes in 2009-10.

Plug those two figures into China's corn equation, and the country is on course for year-end stocks of less than 35m tonnes.

Low stocks

That would be the lowest for at least 15 years. OK, not by much – inventories dropped to 35.2m tonnes at the end of 2005-06.

But on a stocks-to-use basis, a key measure of market tightness, this year's dynamics look far more snug, at 21% versus 26%.

Even though that's not as low as the figure of 15% for soybeans, which China has imported hand over fist, Beijing may well prefer to buy in corn while prices are low - and it has some comfort margin in supplies.

It could be left a forced buyer if the harvest flopped again, an unenviable position should global output not loosen as analysts are expecting.

How much?

Chinese imports could go a long way to mopping up the extra production from record US yields that look on the cards.

Certainly, Beijing may stop short of importing the 22m tonnes it would need to get back to last year's loose stocks-to-use figure of 35%.

But just getting the ratio back to 2006 levels would take more than 7m tonnes (275m bushels).

Temporary blip

Still, corn farmers should not get their hopes too high. The last time Beijing turned importer, 15 year ago, the trend only last two years.

A return to importing now may not last much longer.

China has the potential for improving domestic production – its yields are, at achieves less than 5 tonnes per hectare (80 bushels an acre), half US levels.

It may have the means too, given the home-developed genetically modified corn varieties waiting in the wings.

By Mike Verdin

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