June 11 (Bloomberg) -- Curbs on imports of a U.S. feed ingredient made from corn may help reduce inventories in China, the world’s second-biggest user of the grain, according to a Chinese broker.
About 100 million metric tons of corn were held in state warehouses, enough to meet almost half of the Asian nation’s annual consumption, Ge Huanna, an analyst at Zhengzhou-based Wanda Futures Co., said today in a telephone interview. The Chinese government does not release data on corn reserves.
China last week suspended issuing permits to import dried distillers’ grains, known as DDGS, as the government deem them at a high risk of containing the unapproved, genetically modified MIR 162 strain, sending corn in Chicago to a 16-week low June 10. The country is the top buyer of the product that’s produced when corn is stripped of starch when making ethanol.
“One can assume that the government will not let in imports soon given the huge stockpiles also create a lot of drain on government resources,” Ge said from Beijing. The import restriction may have aimed at boosting domestic demand to help lessen the glut, she said.
China held auctions to sell corn from state reserves twice this week, compared with once a week since holding the first offering on May 22, according to the website of National Grain & Oil Trade Center. As much as 5 million tons will be auctioned on June 11 and 12, the most this year, the center said.
The suspension will boost prices of coarse grain and protein ingredients in China, benefiting rapeseed meal and soybean meal, Shanghai JC Intelligence Co., a researcher, said in a report e-mailed yesterday.
While imports of U.S. corn plunged amid restrictions on the MIR 162 variety, DDGS purchases continued to rise, according to Shanghai JC. About 613,678 tons of imports were reported by China’s customs in April, a monthly record, it estimates.
Domestic DDGS prices were as much as 100 yuan a ton higher as of yesterday than levels before the import suspension, helping reduce losses by corn processors, state-owned researcher Grain.gov.cn said today in an e-mailed report.
Corn for delivery in December on the Chicago Board of Trade traded at $4.4575 a bushel by 11:38 a.m. Beijing time. Prices touched $4.4425 yesterday, the lowest since Feb. 14.