Grain buyers seek foreign crops

Wet weather slows harvest; subsidies push up prices

A surge in Chinese corn prices after the government clamped down on the overloading of trucks has boosted demand for cheaper feed grains such as sorghum and barley from the top exporters, which are the US and Australia.

The Chinese central government launched a nationwide crackdown on overloading in late September, hitting supplies of corn, which must usually be transported around the country from northern growing regions.

Chinese corn prices have climbed 16 percent since the start of October, also supported after the government introduced subsidies for corn processors and as wet weather slowed the latest harvest.

That has provided an unexpected boost to overseas suppliers of grains that can be used as alternatives to corn in animal feed, with traders reporting an uptick in shipments of sorghum from the US and barley from Australia.

“Inspections on overloading ... have limited overall transportation capacity and pushed up the cost ( of local corn). Imported grains now have more price advantage,” said Cherry Zhang, an analyst with Shanghai JC Intelligence Co.

The government wants to stamp out overloading to curb damage to roads and reduce accidents.

The central government has also been giving priority to coal freight on its railways amid surging prices for the fuel as winter starts to bite, according to energy market participants.

US sorghum shipped to southern China currently costs around 1,660 yuan ($ 240) per ton, said traders and analysts, compared with domestic corn arriving at Shenzhen’s Shekou Port for 2,040 yuan per ton. Feed barley is about 1,500 yuan per ton.

China has booked more than 20 vessels of US sorghum since late October for arrival by February, said a trader in China, declining to be identified as he was not authorized to speak with the media. That would amount to more than 1 million tons.

While overall volumes of sorghum imports are still seen dropping in 2016/ 17 from previous years, suppliers had not expected a sudden jump in demand just after China had harvested a bumper corn crop.

At least three vessels of Australian barley are on their way to China, said a Singapore- based trader, adding that there had been a significant upturn in inquiries.

China is the world’s top sorghum importer and is the No. 2 importer of barley.

China’s grain markets have been in a state of flux since the government this year abandoned a State stockpiling policy that had seen it amass about 250 million tons of corn, more than the country can consume in a whole year.

It had been looking to offload grain, but it suspended auctions to encourage purchasing of new crop corn.