China has made one of its biggest-ever purchases of corn on overseas markets, buying 900,000 metric tons of American corn and showing that growing Chinese demand will play an ever larger role in global grain prices.
The country was a net exporter of corn until 2009 but is now struggling to keep up with growing demand for the grain — which is mainly used in China as animal feed — as incomes increase and people eat more meat.
The U.S. Department of Agriculture announced Thursday that China had made the purchase, which comes despite an expected record grain harvest in China this year. China's corn consumption probably totaled 176 million tons in the crop year that started Oct. 1, 2010, according to the department .
The purchase was necessary to help fill China's dwindling corn reserves, said Hanver Li, chairman of the market research firm Shanghai JC Intelligence Co. Ltd., on Friday.
"China's harvest is up but that will just about satisfy domestic demand and meanwhile reserves are running low so China needs to import corn to build up their stocks," he said.
"In the long run, it should have a pretty big impact on global corn prices," Li said of the growing demand from China.
Corn prices on the Chicago Board of Trade have increased about 70 percent over the past two years though have eased from near record highs in June.
Li forecast China will import between 7 and 10 million metric tons of corn over the next twelve months. He repeated a forecast he made last year that China's annual corn imports should climb to as much as 15 million metric tons by 2015.
Li's estimate for the coming year echoes similar numbers reported last week by the U.S. Grains Council, which predicted between 5 and 10 million metric tons of imports for the year beginning in October.
However, the U.S. Department of Agriculture put out a much lower forecast earlier this week, saying China would probably import 2 million metric tons between September this year and August 2012.
In the 1990s, China was a major exporter of corn but sales abroad began to fall off after 2003, grinding to almost zero in 2009. Last year, China became a net importer of corn.
Animals account for about 70 percent of corn consumption in China with the rest used to produce alcohol, corn starch and other products. Only a small amount is directly consumed by humans.
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