China's rejection of corn shipments from the United States this month supports domestic corn prices by forcing Chinese feed mills to buy domestic corn instead, according to an analysis by China Grain News. Is it a coincidence that these rejections happened during the same week China announced a subsidy designed to induce companies to buy corn in the northeastern provinces?
On November 29, border inspection officials in Shenzhen rejected a 60,000-mt shipment of U.S. corn because it contained a GMO corn variety that has not been approved by China's Ministry of Agriculture for import. More shipments were rejected in the following days at Shenzhen and ports in Fujian and Shandong Provinces. The total rejected was over 120,000 metric tons. The shipments were turned away and will have to be sent elsewhere, probably at a discounted price with big losses for sellers. The rejections have cast a pall over the market. All the 500,000-700,000 mt of imported corn expected to arrive this month is at risk of rejection. Grainnews says the declining arrivals of imports is putting upward pressure on Chinese corn prices.
The Grainnews report explains that corn producers and traders in northeastern China are the main beneficiaries of the import rejections. Feed mills in southern China are seeking to build up inventories of corn ahead of the Chinese new year (a period when meat consumption spikes each year). With the holiday approaching and feed demand robust, companies will be forced to buy domestic corn instead of using imported grain. The report says corn prices in the northeast have edged upward recently.
Grainnews notes that the higher prices impose higher raw material costs on Chinese feed mills gearing up to feed pigs for the new year holiday. They estimate the cost of corn purchased from northeastern provinces--including the subsidy--is 2400 yuan per metric ton, 200-to-500 yuan per ton more than the cost of imported corn.
The timing of the imported corn rejections is suspicious. As we have reported here before, China is struggling with a massive grain glut this fall. The rejections came four days after the November 25 launch of this year's program to buy up surplus corn in northeastern provinces to support prices this year. Then, on November 27, the government announced a subsidy for companies outside northeastern provinces for each ton of corn they buy in the region. The first rejection of an imported corn shipment came on November 29.
The application to the Ministry of Agriculture for approval of the "unapproved" corn variety was first submitted in 2010. How was it border officials didn't discover this variety in any of the dozens of shipments arriving in China over the past year--2.3 million metric tons according to Chinese customs statistics--but suddenly every shipment is being rejected starting November 29?
We'll probably never find the "smoking gun," but circumstantial evidence suggests that the rejection is a disguised component of the government's campaign to boost domestic corn sales and prices.
On November 29, border inspection officials in Shenzhen rejected a 60,000-mt shipment of U.S. corn because it contained a GMO corn variety that has not been approved by China's Ministry of Agriculture for import. More shipments were rejected in the following days at Shenzhen and ports in Fujian and Shandong Provinces. The total rejected was over 120,000 metric tons. The shipments were turned away and will have to be sent elsewhere, probably at a discounted price with big losses for sellers. The rejections have cast a pall over the market. All the 500,000-700,000 mt of imported corn expected to arrive this month is at risk of rejection. Grainnews says the declining arrivals of imports is putting upward pressure on Chinese corn prices.
The Grainnews report explains that corn producers and traders in northeastern China are the main beneficiaries of the import rejections. Feed mills in southern China are seeking to build up inventories of corn ahead of the Chinese new year (a period when meat consumption spikes each year). With the holiday approaching and feed demand robust, companies will be forced to buy domestic corn instead of using imported grain. The report says corn prices in the northeast have edged upward recently.
Grainnews notes that the higher prices impose higher raw material costs on Chinese feed mills gearing up to feed pigs for the new year holiday. They estimate the cost of corn purchased from northeastern provinces--including the subsidy--is 2400 yuan per metric ton, 200-to-500 yuan per ton more than the cost of imported corn.
The timing of the imported corn rejections is suspicious. As we have reported here before, China is struggling with a massive grain glut this fall. The rejections came four days after the November 25 launch of this year's program to buy up surplus corn in northeastern provinces to support prices this year. Then, on November 27, the government announced a subsidy for companies outside northeastern provinces for each ton of corn they buy in the region. The first rejection of an imported corn shipment came on November 29.
The application to the Ministry of Agriculture for approval of the "unapproved" corn variety was first submitted in 2010. How was it border officials didn't discover this variety in any of the dozens of shipments arriving in China over the past year--2.3 million metric tons according to Chinese customs statistics--but suddenly every shipment is being rejected starting November 29?
We'll probably never find the "smoking gun," but circumstantial evidence suggests that the rejection is a disguised component of the government's campaign to boost domestic corn sales and prices.
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