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China lifts ban on corn exports, traders say

HONG KONG: China has lifted a ban on corn exports, approving sales of 1.5 million tonnes to Japan and South Korea, to protect farmers in regions where prices have fallen dramatically in recent months, traders said on Tuesday.

But an official at China's state grain reserve denied any decision had yet been made to lift the export ban, imposed on corn and rice in December 1994 after grain reserves were found to be much lower than officials had thought.

"This is just an idea of the three northeastern provinces, Heilongjiang, Jilin and, Liaoning, their ideas have not yet been sent to the central government for approval. There is no concrete content to their ideas," he told Reuters in Beijing. However, a trader involved in contracting the sales said the decision to lift the ban, came as market prices for corn in the northeastern producing provinces fell to less than 1,000 yuan (US$120) a tonne.

"Petitioning came from the governors of Heilongjiang and Jilin to protect farmers' income and earn hard currency," the trader said on condition of anonymity.

He said the corn would move to smaller Japanese and South Korean ports from May to August, priced at $175-180 CIF a tonne after subtracting the Chinese seller's value-added-tax rebate which is refundable on exports. Without the rebate the sales price would be around $190 a tonne.

This compares favourably to the current price of U.S. corn, which has recently set new all-time highs on U.S. exchanges due to rapidly diminishing domestic stockpiles.

U.S. corn was arriving in Asian ports at between $207 and $210 a tonne, traders said.

"It's a good buy," a researcher with a European trading house said of the Chinese price. "It will certainly have an impact on the price of U.S. corn."

Corn futures prices on the Chicago Board of Trade (CBOT) exchange have risen nearly 40 cents in seven sessions, with May corn rising on Monday to $4.20-1/2 a bushel.

A Chinese trader said it made sense for China to export at current prices.

"They can cash in on Tuesday's high market and re-import later in the year," he said.

A spokesperson for Jilin's grain bureau said the province had corn left over from the 1995 harvest, which began in October, but lacked the cash to buy it.

"If we are to export corn, we need to purchase it from the farmers first," the official said.

Traders said market prices in some areas of the northeast corn belt had fallen as low as 960 yuan a tonne. Once the corn was dried, prices should begin to rise to around 1,200 yuan a tonne, they said

Traders agreed China had a surplus of corn though news of the decision to export such a large quantity, instead of smaller lots, came as a surprise.

Most traders and Western grain industry observers, including the U.S. Department of Agriculture, put China's current harvest at 108 million tonnes.

Annual demand is around 110 million tonnes. Imports in the 1994/95 crop year were five million tonnes.

Imports in the current crop year began high, with 1.5 to two million tonnes arriving between October and February, but have dwindled to almost nothing since, trading sources said.

Feed mills in the south were now using mostly domestic corn, they said.

A number of traders said Chinese officials were putting the current corn crop at 112 million tonnes.

"If they (Chinese officials) believe their own corn numbers, then this gives them a surplus of four million tonnes," the Chinese trader said.

"It's not a matter of how truthful those figures are, if the people who make these decisions believe the crop is 112 (million tonnes), they will go ahead and allow exports."

Until December 1994, when it banned foreign sales of corn and rice, China had been a net corn exporter, and that year sold 10 million tonnes to foreign buyers.-Reuter