Chinese quarantine authorities have sped up testing on imports of distiller's dried grains, suggesting they have relaxed checks on the corn by-product since rejecting some U.S. cargoes for being tainted with an unapproved GMO strain, traders said.
China had turned away about 2,000 tonnes of U.S. DDGs by late December and about 600,000 tonnes of U.S. corn after shipments were found to contain traces of Syngenta AG's MIR 162 genetically-modified variety of corn, which has been awaiting Beijing's approval for more than two years.
"Quarantine authorities have relaxed inspections and it seems they are not going to make big trouble on DDG shipments," said one trader with a domestic trading house.
The DDG rejections had pressured Chicago Board of Trade corn prices, with traders fretting that cargoes would be difficult to switch to other destinations as the substitute for corn and meal in animal feed is not widely used in the rest of Asia. Chinese buyers have to bear all losses from any rejections, the traders said.
Some DDG buyers have resumed shipments from the United States, the largest exporter, they added.
"Some more shipments have been cleared at inspection and we feel authorities are quite flexible," one of them said.
Quarantine authorities in the province of Guangdong and city of Shanghai met with industry participants this week and agreed to speed up inspections after the stricter testing caused a backlog, said one industry source.
"The situation seems to have improved these days and inspection turns regular," Chinese market analyst JCI told clients in a letter seen by Reuters on Tuesday.
"Last week, there was 20-25 percent of imported DDGs passing the customs inspection and the passing rate has increased to 40-50 percent this week," said the Shanghai-based analyst firm, widely followed by the U.S. grain trade for China market trends.
"Market insiders expect the customs clearance rate will further rise to 60-70 percent next week," JCI said.
China, the world's top buyer of U.S. DDGs, accounted for about 40 percent of U.S. exports of the high-protein feed in the 2012/13 marketing season.
A signal that China's grain inspections approvals were improving came on Monday when the price of U.S. DDGs jumped $10 per ton, or 5 percent or more, at export markets, rebounding from steep declines that occurred during December in nervous reaction to China's stance.
U.S. traders said the December price drops of up to 20 percent in DDGs had spurred fresh domestic and export interest - including from China. Barges of DDG shipped in the first three months of the year on the Mississippi River continued to rise on Tuesday, bid at $205 per ton, up from $180 last week but down from $275 in early December, they said.
But Chinese inspections of corn cargoes look likely to remain strict.
"The corn issue is unlikely to be resolved in the short-term - it is something (being carried out) in relation to the government stockpile scheme and domestic supply situation," said one trading manager with a major feed mill.
Industry sources said Beijing's GMO corn scrutiny is due to domestic supply glut as it seeks to curb cheap imports and support domestic corn prices.
A U.S. Grains Council delegation travelled to China this week to try to resolve the issue.