Widening corn price gap at home and abroad may accelerate corn imports

Analysts say that as international corn prices tumble sharply, the price gap between China's domestic corn prices and the international market has widened further, making full-tariff imports more economically viable, and China's corn imports are expected to grow.

China is the world's second-largest corn consumer. The improved outlook for China's corn imports could provide bullish support for international corn prices. International corn prices are currently still hovering near five-year lows. However, analysts point out that because of concerns the government may take measures to restrict imports, the volume China's buyers initially import may be limited.

⟦NL> China's domestic corn prices being higher than the international market is related to the government's implementation of a stockpiling program to raise farmers' incomes; in addition, the Chinese government also controls the scale of imports of major grains, including corn, through a quota system. At the end of 2014, the National Development and Reform Commission issued an announcement stating that the 2015 corn tariff-rate quota (TRQ) was 7.2 million tonnes, with the tariff on corn imports within the quota at 1%, far below the out-of-quota tariff of 65%. 60% of the TRQ is allocated to state-owned companies and 40% to non-state-owned enterprises.

So far this year, as U.S. corn production hit a record high, combined with some worrying factors on the demand side, global corn prices have fallen 9%. By contrast, China's corn prices remain high, and the price gap with the international market has widened further, so even out-of-quota imports now look economically viable. Out-of-quota imports require payment of the full 65% tariff.

Jin Weidong, chairman of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd., said that if (imported corn prices) are cheaper, we will of course consider (importing). The price of domestic corn and imported corn differs by 100 yuan/tonne (16 U.S. dollars); this price gap is very significant. Last week, the price of U.S. No. 2 corn at Guangdong port was about 1,493 yuan per tonne, nearly 1,000 yuan cheaper than domestic corn. Even after paying the 65% out-of-quota tariff, imported corn is still about 90 yuan per tonne cheaper than domestic corn, and international corn prices are still falling.