Record Corn Imports by China to Drive Rally, Rabobank Says

(Businessweek) – The biggest-ever imports of corn by China, the world’s largest livestock producer, may help sustain a record rally in Chicago that’s been driven by drought across the U.S. Midwest, according to Rabobank International.

Shipments may climb to 7 million metric tons in the year starting Oct. 1 from about 5 million tons this year, Daron Hoffman, Shanghai-based director of research, said in an interview. That compares with a U.S. Department of Agriculture forecast for a 60 percent drop to 2 million tons in 2012-2013.

Record imports by China may spur higher prices, lifting global food costs and forcing rival importers to cut purchases. China’s demand needs to be met by imports no matter what the price, according to Nathan Broders, director of feed ingredients at INTL FCStone Inc. Corn has rallied 24 percent to a record this year as the worst U.S. drought since 1936 slashed output.

Prices may be much higher in the second half of 2012 as China increases purchases, Hoffman said yesterday, without giving a forecast. His estimate for imports in 2012-2013 is higher than the USDA’s outlook because he sees a smaller increase in China’s output this year, he said in Shanghai.

Corn for December delivery gained 0.2 percent to at $8 a bushel on the Chicago Board of Trade at 5:15 p.m. in Shanghai, after reaching a record $8.49 on Aug. 10. The most-active contract on China’s Dalian Commodity Exchange ended at 2,362 yuan ($372) a ton after climbing 3.9 percent this year.

Corn Deficit

China, a net exporter before 2010, has shifted to a deficit as rising incomes spur demand for protein-rich diets. Corn is used to make animal feed. Shipments in the first 10 months of the 2011-2012 marketing year were 4.2 million tons, near the record 4.3 tons in 1995-1996, customs data show.

The best-case scenario for China’s corn harvest this year is a rise of 1 percent to 1.5 percent, Hoffman said, citing his own analysis. Last month, the USDA forecast production in China, the second-largest consumer, may gain 3.7 percent this year.

Global prices of corn and soybeans will need to stay at a high level for years as a so-called structural requirement to encourage farmers to boost planting and increase inventory drained by China-led growing consumption, Hoffman said. Soybeans rallied to a record in Chicago on Sept. 4.

To contact Bloomberg News staff for this story: William Bi in Shanghai at  wbi@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at  jlloydsmith@bloomberg.net