* China imports to surge further amid tightening supplies
* Growing purchases set to tighten world corn market
* Beijing issued additional quotas to COFCO - source
* Domestic corn futures hit record highs
SINGAPORE/BEIJING, Oct 23 (Reuters) - China's government is
discussing permits for millions of tonnes of additional corn
imports over the next year, three industry sources told Reuters,
amid a surge in animal feed demand and after storms and drought
damage tightened domestic supplies.
A round of new import orders from China would make it the
world's top importer of corn for the first time and likely drive
up global prices of corn and other grains. That would amplify
food inflation caused by disruptions to global supply chains due
to the coronavirus pandemic.
Food security has emerged as a global theme during the
pandemic, exacerbated in China by a disease that has devastated
the hog herd over the past two years and left pork supply tight.
China is the world's largest pork consumer and second-largest
Beijing previously held massive reserves but has almost
emptied them at auctions, leading to grain buyers buying
alternatives such as rice and wheat, as well as boosting corn
imports. Domestic corn prices hit record highs this month on
shortages after a typhoon, a drought and a pest hit
Two China-based sources and a Singapore-based trader with
knowledge of import discussions said Beijing was considering
issuing more lower-tariff quotas for buyers to ease the domestic
shortage. These quotas encourage imports by exempting shipments
from most of the 65% tariffs that would otherwise be levied by
"(The government) will review the market supply-demand
situation, and might issue more quotas later that could go into
the state reserves," said one of the sources familiar with the
The people with knowledge of the deals declined to be
identified because they are not authorized to speak to media.
China's state planner, the National Development and Reform
Commission (NDRC), which sets import quotas, did not immediately
respond to faxes seeking comment on future additional imports.
COFCO, China's top grain trader, and state stockpiler Sinograin
did not respond to faxed requests for comment.
China's emergence as the top importer as it moves away from
a long-standing policy to encourage domestic self-sufficiency in
corn will change global grain trade and encourage corn growers
worldwide to plant more to meet Chinese demand.
After China began importing soy - another crop used for
animal feed - in the 1990s it rapidly became the top buyer.
Farmers in Argentina, Brazil and the United States responded by
switching to soy crops.
"China over the next decade may change the landscape of the
world corn balance sheet by becoming a major import player,"
said Terry Reilly, senior analyst at Chicago brokerage Futures
QUOTAS FAR BELOW DEMAND
Beijing routinely issues 7.2 million tonnes in annual
low-tariff quotas for corn imports, and meets most of its 280
million tonnes of annual demand through domestic crops. China
has never before used its full annual quota.
Analysts have estimated it may need more than four times
that quota, or 30 million tonnes, in the 2020-2021 October to
September crop year.
The U.S. Department of Agriculture attache in Beijing said
in a report issued earlier this month there was talk in China
that state-owned companies were drafting a report to the NDRC
recommending allocating an additional 20 million tonnes in
Even before further additional quotas are awarded, Chinese
importers have ordered more than double the annual allowance.
They have booked around 12 million tonnes of corn imports from
the United States and around 5 million tonnes from elsewhere
including Ukraine for the crop year, according to a
Singapore-based international trading source and two other
people with knowledge of the deals.
That would put China just behind Mexico, the world's largest
importer. Mexico is forecast to import 18.3 million tonnes,
according to United States Department of Agriculture (USDA)
Of the corn sold to China, 3.7 million tonnes have been
exported, according to USDA. China could still cancel corn
orders that have not shipped.
Beijing has already authorized a 5 million tonne special
low-tariff quota to top grains trader COFCO, which was mainly
used to book U.S. supplies, according to one of the sources
familiar with the details of the trades.
Under the terms of that extra allowance, COFCO would import
the corn at the lower tariff rate, but its profits will be
capped at 30 yuan ($4.49) per tonne and any additional windfall
will go to the state, the person said.
"I think this is done out of considerations from two
perspectives," the person said. "One is we do need corn.
Secondly, we have this deal with the United States that we need
China committed to buying billions of dollars of additional
agricultural imports from the United States under the terms of a
deal signed in January to end a trade war between the two
It is short of the $36.5 billion target for 2020, but has
increased imports this year as it seeks to address shortages of
corn, pork and soy.
A report from the U.S. Trade representative's office on
Friday said China had purchased $23.6 billion in agricultural
products so far this year.
($1 = 6.6850 Chinese yuan)
(Additional reporting by Karl Plume in CHICAGO; Editing by
Simon Webb, Shivani Singh and Richard Chang)