Asian Corn Demand Set to Strain Global Supplies

on Jul 16, 2012
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It seems that the dry weather in the US Midwest will not be the only factor adding pressure on global corn supplies, with Bloomberg reporting on 13 July 2012 that demand from several Asian countries is projected to increase significantly. Yet, as shipments from the United States, the world’s largest corn grower, are reduced on account of deteriorating crop conditions, it is as yet unclear where the corn supplies to meet the growing demand from Asia will come from.

According to Rabobank International, as quoted by Bloomberg, demand from several Asian countries, including China, is expected to rise. Jean Yves Chow, senior industry analyst covering grains, animal-protein and food-processing markets, noted in an interview that China, the world’s largest corn user, was likely to import at least eight million metric tonnes in 2012-2013, relative to the five million tonnes imported in 2011-2012. Mr Chow attributes the projected increase to the rising need for grains as the country’s backyard farms are replaced by commercial farms using about 50-55 percent of corn in their feed formula. “China, which used to export corn to South Korea, will be importing almost as much as South Korea,” said Mr Chow.

!m[](/uploads/story/156/thumbs/pic1_inline.png)Bloomberg also quotes the forecast of Olam International Ltd (OLAM), a Singapore-based commodity supplier, noting that China’s corn imports may total 20 million tonnes by 2015. Goldman Sachs Group Inc. (GS) said in a recent report that dry weather in certain parts of China was also likely to lead to higher corn demand.

Yet, China is not the only Asian country where corn demand is projected to rise in near future. Mr Chow also notes that Japan may increase its imports from 15.5 to 16 million tonnes. “We will see fewer exports from the U.S., and it comes to a question where supplies will be from amid strong demand from Asia,” he says.
Bloomberg reports that on July 11, corn for delivery in December reached $7.48 a bushel, the highest level observed since September 2011. Goldman and Sachs on the other hand boosted its corn price forecast to $6.90 a bushel from $6.30 in three to 12 months. The main reason for the rallying corn prices is the dry weather in the US, with the US Department of Agriculture recently reducing its outlook for the US corn harvest to 12.97 billion bushels, from 14.79 billion bushels predicted in June. A recent USDA report indicating that US farmers had planted more corn than originally planned failed to ease dry weather concerns, which continue to determine the observed surge in corn prices.

As the US crop conditions continue to deteriorate, Asian importers might need to look for other cheaper alternatives for their growing corn demands. South American corn might prove to be one such alternative, with Bloomberg reporting on 19 June that South Korean feed-makers were looking to import more corn from South America for the rest of the year due to the price gap between South American and US corn.

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