An attack by Washington on Beijing’s barriers against chicken imports was blamed for undermining a rally in corn futures – dampening hopes of China turning to the US to bolster tight supplies of the grain.
Ron Kirk, the US trade representative, urged the World Trade Organization to investigate Chinese duties imposed a year ago on imports of American broiler meat, terming the levies unjustified.
"China must play by the rules," Mr Kirk said, blaming the restrictions for cutting by 90% a trade that had been worth $1bn, and putting 300,000 US agricultural jobs at risk.
The US-China tensions were blamed for a fallback in corn futures after they – temporarily –returned above $7 a bushel, after Beijing’s announcement of the auction of 3.7m tonnes of the grain from state stocks "to meet market demand" stoked expectations of imports too.
Chicago had buzzed on Monday to rumours that China was in the market for 4m-5m tonnes of corn imports, talk given credence by the rise in prices to record highs of approaching $10 a bushel on cash markets.
The potential for Chicago corn futures "is well beyond the recent highs if China is back", GrainAnalyst trader Matthew Pierce said, highlighting Chinese imports of 4.7m bushels of US corn last week, as highlighted in cargo inspection data.
However, Mr Kirk’s attack, coupled with a lack of further confirmation of US interest, was blamed for pulling Chicago’s December corn contract back to a one-month closing low of $6.90 ¼ a bushel.
"Just as corn completes an almost $1-per-bushel retreat and finds a pricing point that allows for the potential to profitably export cargoes to China – boom, in steps [Mr Kirk] and picks a political fight with the Chinese government," Darren Dohme at Powerline Group said.
"It now appears we’ll have to wait and see if the funds are ready to step back in and buy following this afternoon’s announcement."
‘Import significant volumes’
Earlier, corn prices had also been helped by a forecast by Abares, the Australia’s official commodities bureau, that China would be "an important player in the world corn market", pegging the country’s imports at 2m-5m tonnes in 2011-12, compared with a US Department of Agriculture forecast of 2.0m tonnes.
"In an attempt to contain the demand-driven increase in prices, China is forecast to increase supply of corn in the domestic market by running down its corn stocks by 5% to 51m tonnes," Abares said, noting in particular China’s need for feed for a planned expansion of hog production."
"In addition, it is expected to import significant volumes of corn from the world market."
Abares’ comments came in a report in which it hiked by 22% to $306 a tonne its forecast for US cash corn prices at Gulf of Mexico docks in 2011-12, cutting its forecast for world stocks of coarse grains overall to 142m tonnes.
The figure, which equated to a "record low" stocks-to-use ratio of 12.4%, compares with a USDA estimate of 150m tonnes.
At Rabobank, analyst Erin FitzPatrick pegged China’s corn imports at about 4m tonnes in 2011-12, highlighting soaring demand from hog producers while estimating this year’s harvest at a relatively modest 172m tonnes.
The USDA has the crop at 178.0m tonnes, while the CNGOIC has production at 182.5m tonnes.
"The USDA has China’s corn yield reaching its second highest ever this year," Ms FitzPatrick told Agrimoney.com.
"But weather has been an issue this year for corn crops. Not perhaps as much as it has been for crops like rice, but it does make it look unlikely China will get its second highest corn yield on record."
Official Chinese crop data has gained a reputation for questionable reliability, thanks to a subsidy system which rewarded provinces by production.
Other analysts have pegged China’s corn import needs as rising even higher this year above the 1.3m tonnes reached in 2010-11, on USDA estimates, and 1.5m-2.0m tonnes according to Abares.
Li Qang, chief analyst at JC Intelligence, an influential Shanghai-based consultancy, pegged 2011-12 imports at 9m tonnes.
Li Xigui, deputy head of grains at the CNGOIC, estimated China’s corn production shortfall reaching 11m tonnes by 2015, citing restrictions such as water, seed and land shortages on output growth.
On China’s Dalian exchange, corn for November delivery closed up 0.4% at 2,427 ringgit a tonne.