With record quarterly corn imports in Q3 and around another 1mt reportedly on the water, China looks set to breach the annual foreign import quota (this year set at 7.2mt). To date, China has imported 6.9mt (up to 3mt yoy) on the back of increased consumption and concerns that this year’s domestic harvest might have been negatively affected by an earlier drought, localised typhoons prior to harvest and increased pest damage.
Chinese corn production is usually around 250mt but demand has increased over the last two years due to increased poultry numbers and the government’s decision to ban the feeding of swill to the nation’s pig herd. So, despite pig numbers being decimated by African Swine Flu over the past three years, corn stocks appear to have been significantly drawn down and a possible shortage of supply evidenced by domestic corn prices have accelerated to a record high of 2,608 RMB per ton on the Dalian Commodity Exchange last week.
In recent years Ukraine has provided the vast majority of China’s corn imports though last year’s record shipments of 4.1mt have already been eclipsed with 4.9mt landed in China by the end of Q3. However, this year’s major development is the return of consistent shipments from the USA since June with Chinese imports rising to 1.5mt by the end of Q3, already five times greater than the sum of last year’s total figure.
However, much more cargo may still be on the water as an analysis of USDA data reveals a half of the 1.2mt shipped in September sourced from the US Gulf is unlikely to have reached discharge as yet whilst another 0.7mt corn has been reportedly been shipped during October from the US Gulf loading ports. As most corn shipments to China are carried by Panamax-Kamsarmax tonnage these incremental volumes and longer employment days would be a major boost for the sector going forward. Looking back in history, the boost from the additional 5mt corn shipped from the USA to China in 1995 was sufficient to push Panamax annual rates up to decade-high levels of nearly $15,000/day, up from $10,500 in 1994 before falling back to just under $10,000 in 1996 when China no longer required additional imported corn.
