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Last Updated : Apr 11, 2012 10:08 AM IST | Source: ft.com

Chinese grain imports hit record high

China's grain imports hit a record high in March, as the world's most populous country increasingly turns to overseas markets to meet its agricultural needs.


China's grain imports hit a record high in March, as the world's most populous country increasingly turns to overseas markets to meet its agricultural needs.


Customs data from Beijing revealed that grain imports reached 1.64m tonnes in March, up sixfold from a year earlier and up 50% from the previous month.


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China has to feed a fifth of the world's population with only 8% of the world's arable land, and does not grow genetically modified grains. As rising incomes and more meat-heavy diets boost grain demand, China's reliance on imports has slowly increased.


Big corn purchases likely contributed to the jump in March grain imports, said traders. The grain category includes corn, wheat, rice and barley. Specific data for each will be released toward the end of this month.


China accounts for about 20% of the world's corn consumption and only 4% of global corn trade, but its sudden increase in corn buying has greatly tightened the global market. China's corn imports in January and February this year totaled 1.26m tonnes, four hundred times more than the same period last year.


China's domestic corn prices are among the highest in the world, and during January and February commercial firms were taking advantage of the arbitrage between Chinese and US corn prices to import corn at a profit. However the arbitrage window has now closed, and traders say that could damp corn imports in coming months.


The surge in grain imports was part of robust overseas purchase of commodities in March, with imports of crude oil hitting their third-highest levels ever at 5.56m barrels per day, up 8.6% from the previous year.


"These very comforting numbers, China is not slowing too rapidly," said Ian Roper, analyst at CLSA in Shanghai, referring to overall commodities imports in March.


Imports of iron ore, a key steelmaking ingredient were up 5.7% from the previous year at 62.8m tonnes. Meanwhile copper, a bellwether of industrial activity, stayed near record highs with imports of 462,182 tonnes in March, up 50.5% from the previous year.


However it was grain that recorded the single biggest year-on-year jump in percentage terms of any commodity with a 500% increase, according to the customs data released Tuesday.


Analyst Ma Wenfeng at Beijing Orient Agribusiness said he expects China's grain imports to grow. He forecasts corn imports will hit 7m tonnes this calendar year, and wheat between 1.5m to 2m tonnes.


"The key thing is the price," said Mr Ma. "Right now China's corn prices are incredibly high. . . if [state owned commodity trading house] Cofco can make money then it will import."


Others pointed out that mold and mildew had damaged some stored corn last year, contributing to tight domestic corn market. "Production [of corn] has increased significantly in China, but safe and secure storage have not grown in conjunction," said Rabobank analyst Daron Hoffman.


Wheat imports have also soared, thanks in part to demand for high-protein wheats used in specialty breads. China's wheat imports in January and February were 580,000 tonnes, more than three times higher than the same period last year.


The March grain imports are the highest since Chinese customs started reporting aggregate grain imports in 2006.

Additional reporting by Gwen Chen in Beijing.

First Published on Apr 10, 2012 12:40 pm
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