China rejects U.S. corn cargoes for GMO amid domestic glut
China has rejected five batches of U.S. corn tainted with a genetically-modified strain not yet approved by its agriculture ministry, a move that could discourage imports amid a growing domestic supply surplus.
Traders said the spectre of further rejections could prompt a sharp decline in new Chinese orders for U.S. corn, dragging on global prices that have already dropped around 40 percent this year.
Shipments totalling 120,642 tonnes - the biggest ever grain volume to be turned away from China's ports - were found to contain the unapproved insect-resistant MIR 162 variety of corn, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) said on its website (www.aqsiq.gov.cn).
The bureau also said it had told the United States to improve its inspection procedures to ensure that it complied with Chinese quality standards.
The total volume did not include a cargo of about 60,000 tonnes that was turned away last month, it said.
"With the latest discovery, buyers and sellers are likely to be increasingly cautious about placing new orders while shipments are in danger of being rejected," ANZ Bank said in a note.
Nearly 2 million tonnes of U.S. corn are currently on their way to China, and may face stringent testing for MIR 162, which Beijing has not approved for import but has been in the U.S. supply chain since 2011. The strain is already shipped to Japan, South Korea, Russia and even the European Union, which is notoriously slow in approving GMO crop varieties.
With domestic prices eroded by a corn supply glut, the authorities may be inspecting cargoes more closely to reduce import volumes, some analysts suggested.
"To some extent, there is a link to the domestic supply surplus - these are the rules of the game," said an industry analyst with a government-linked think-tank, who declined to be identified.
"We believe future incoming cargoes will face strict inspection."
AQSIQ declined to comment.
The U.S. supplied nearly 94 percent of China's corn imports in the first 10 months of 2013.
In the long run, China is expected to increase corn imports as the country urbanises and demand for meat and dairy products rises, with the nation prioritising staple grains such as rice and wheat.
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