A farmer spreads out corn to dry in Hutouyan, Hubei province. China imported 1.57 million tons of corn in 2010. Nelson Ching / Bloomberg

BEIJING - China, the world's second-biggest corn consumer, may limit imports this year after the government told industrial users to stop buying the domestic supply, according to Yigu Information Consulting Ltd.

Starch and ethanol producers use about 40 million tons a year, so a temporary halt in purchases may free material for the livestock industry, said Feng Lichen, general manager of Yigu, which runs the country's biggest corn information portal.

China imported 1.57 million tons of corn in 2010, according to customs data, the most in about 14 years, as the government sought to cool food inflation running at 9.6 percent in December. The country may boost purchases "to upward of" 7.4 million tons this year, said Thomas Dorr, president of the US Grains Council, in December.

"China isn't yet at a stage where it must use imports," which at the moment are more expensive than domestic supply, Feng said from Dalian.

The State reserves were given priority to buy corn at below-market rates while other users, including biochemical producers owned by COFCO Ltd, were ordered to halt procurement, Feng said on Jan 17. These companies have now stopped buying, Grain.gov.cn said on Thursday.

The government is concerned about pork supply for the people, so this policy essentially ensures domestic supply can meet livestock use, he said.

Industrial users consume about 4 million tons of corn a month so "a couple of months of their consumption" will likely meet the reserves' goal of boosting inventory by around 10 million tons, Feng said.

China produced 164 million tons of corn in the marketing year ended Sept 30, with 99 million tons used by the livestock industry and 45 million tons by producers of bio-chemicals, data from the China National Grain & Oils Information Center show.

Buying by trading companies, which stockpile the grain as part of their operations, has also stopped as the government restricts their financing, so purchase prices may come down to where the State reserves will start buying, Feng said.

Most of the imports last year came from the United States, customs data show. Import estimates for this year from analysts including Feng and Shanghai JC Intelligence Co range from 1.5 million tons to 5 million tons. The exact level will depend on how much corn is planted and crop development, Feng said.

As of Tuesday, the post-tax cost of so-called No 2 yellow US corn shipped into Chinese ports for March delivery was about 2,562 yuan ($389), according to industry website Jcce.cn. The spot price in southern China was 2,160 yuan a ton, according to data from Shanghai JC Intelligence Co.

Bloomberg News

(China Daily 01/28/2011 page17)