The increase in the forecast is significant as there has been widespread speculation in recent months that China may have purchased dozens of cargoes of U.S. corn, with the reports, helping push benchmark U.S. corn futures to record highs.
The IGC forecast China’s corn imports to increase to 3.0 million tons in 2011-12 from 1.7 million tons this year, assuming local prices don’t fall sharply, due to strengthening demand, tight local supplies and high prices, as well as high domestic transportation costs.
This would be China’s highest corn import volume in 16 years, it said.
Still, a recent rise in import prices, as well as a 1% import duty and 13% value-added tax levied on private purchases, have made U.S. corn less competitive for private buyers in southern China, potentially limiting the increase in inbound shipments, it said.
Near-month corn futures on the Chicago Board of Trade hit an all-time high of almost $8.00 a bushel last month, propelled by speculation China had made heavy purchases of U.S. corn from existing stocks and the upcoming harvest that starts in September. Low U.S. inventories also contributed to the rally.
Due to the likely higher Chinese demand, the IGC also revised upward its U.S. corn export forecast for 2011-12 by 500,000 tons to 49 million tons.
The IGC left its China corn output forecast for 2011-12 unchanged at 180 million tons, up from 177.3 million tons this year.
China’s corn output is on the rise, but is not keeping pace with burgeoning demand, particularly from pork producers, said an analyst with a Singapore-based commodities brokerage.
Traders said that the IGC forecast may be on the lower side, and imports may be closer to 5.0 million tons.
There are indications that China has already locked in purchases of more than 3.0 million tons, said a trader with a global commodities trading company in Tokyo.
He said that due to rising inflation, the Chinese government is offloading corn reserves into the market, and large-scale imports have become essential to replenish the stockpiles.
A steep decline in international prices at the start of July triggered renewed buying interest from China, the IGC said.
There is speculation that China may have already secured supplies of around 2.0 million tons of U.S. corn, it added.