China allows Brazilian corn imports, setback for U.S.
China has allowed Brazilian corn imports to start this month, a further blow to U.S. exports to the world's No. 2 consumer of the grain already hurt by the discovery of an unapproved genetically modified strain in shipments.
Corn from Brazil had been approved for import from March 31, Chinese quarantine authorities said on Tuesday in a statement on their website (www.aqsiq.gov.cn). The government of Brazil, the world's second-largest corn exporter after the United States, flagged the move late last year, but the start date was not revealed at that time.
China mainly imports corn from United States, but shipments from the country have been curbed after officials turned away about 1 million tonnes due to the presence of a genetically-altered strain that has not been approved by Beijing.
Brazilian corn exports to China could weigh on U.S. futures which have come under pressure since China started rejecting U.S. cargoes late last year. On Tuesday, benchmark May corn was little changed after closing 0.5 percent lower in the last session.
"It means U.S. corn prices have to be competitive with the rest of the world," said Paul Deane, agricultural commodity strategist at ANZ in Melbourne. "All (origins) trade at some degree of relativity, but U.S. corn does trade at a premium."
The news comes a week after China's biggest grain trader COFCO Corp. agreed to acquire a majority stake in Noble Group Ltd's agribusiness.
Noble owns a number of agricultural assets in South America, including grain storage facilities, soybean processing plants and shipping terminals. In addition to storage for grains and soybeans in Brazil, Noble has a 75-percent share in a dry bulk export terminal at Santos port.
"Noble has got assets in South America, so (shipping corn to China) fits in with COFCO's strategy," ANZ's Deane said.
COFCO also announced in February plans to buy a 51-percent stake in Dutch trader Nidera.
China is boosting sources of animal feed grain supplies as the nation's domestic production is failing to move in step with rapidly growing demand for protein-rich food.
The country, which already imports 60 percent of the world's traded soybeans, is expected to emerge as a top corn buyer.
"China is adding more supply origins to meet growing demand in the long term," said an industry analyst with an official think-tank. "Brazilian supplies can be very competitive with those from the United States."
In the wake of the rejections of U.S. cargoes, China has stepped up imports from Ukraine. Argentina, Peru, Thailand and Laos are the other nations approved to ship corn to China.
Brazil was not given the greenlight sooner as the approval process is typically lengthy.
Brazil is expected to export 20 million tonnes of corn in the 2013/14 marketing year, according to an estimate by the U.S. Department of Agriculture.