Increased Demand in China Could Lead to Long-Term Trade
USGC says demand in Asia is much stronger than expected and reserves are less than estimated.
Compiled by staff
Published: Apr 5, 2011
This year China made the first significant purchase of U.S. corn since 1995, buying 59 million bushels. U.S. Grains Council President and CEO Tom Dorr says stronger demands for livestock, poultry and dairy supplies resulting from the economic growth in China and the rest of Asia led to those purchases. Dorr has been visiting China this week and found that state corn reserves are 10-12 million metric tons less than previously thought.
"After reviewing the figures with a number of sources, I believe it is possible that China will purchase another 2-3 million tons of corn prior to the end of the 2010/2011 crop year," Dorr said. "Chinese buyers would ideally like 5-7 million tons but realize present global inventories may not accommodate this added demand."
According to Dorr a system to signal demand in both countries needs to be developed if the U.S. is to capture the long-term value of these changes in the corn trade between the U.S. and China. He also emphasized the need to produce above normal trend yields, continue developing technology and infrastructure and the need for Chinese buyers and end-users to be transparent with regard to becoming a sustainable market by providing an accurate reading of production estimates and carryover stocks.
"It is important Chinese buyers and U.S. producers work together to address these challenges and opportunities in the immediate term," Dorr noted. "We need to work together to make necessary commitments to technology and infrastructure development. The Chinese can produce more corn and we can deliver more. All of this will be necessary to reward the market accordingly. The U.S.-China relationship is critical and the Council looks forward to future opportunities to solidify this relationship."
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