China Grain Reserves Corp (Sinograin), which manages the state grain reserves, may have signed deals to import U.S. corn and it is ready to boost purchases to replenish depleted reserves if the prices are attractive.
Sinograin's interest comes after Chicago Board of Trade corn prices dropped to about $6 a bushel last week, the first time they have breached that level for about three months, but talk of China's buying pushed up prices to a high of $6.28-1/2 per bushel on Friday.
"We are ready to buy, and the volume depends a lot on prices," Sinograin spokesman Cheng Bingzhou told Reuters, without disclosing what price would be acceptable.
"Import contracts may have been signed, but I have not been informed," Cheng added, when asked about rumours in the market that the company had signed agreements last week to import 500,000 tonnes.
China's has already bought nearly 4 million tonnes of U.S. corn this season and it has been trying to widen its sources of supply with an agreement to buy Argentine corn signed in February.
Old-crop U.S. corn supplies were expected to shrink to the lowest in 16 years by the end of the summer but could be replenished in the next U.S. harvest, if farmers plant the largest corn area since 1944 as forecast.
Sinograin's stockpiling of corn in the domestic market would conclude this month while physical domestic corn prices <0#ASCORN-CN> are hovering at a record high on tight supplies of good-quality corn.
Excessive rains damaged the country's corn harvest in parts of northern provinces last year, worsening the country's corn supply and Sinograin only purchased 1.2 million tonnes of corn from last year's harvest, a company official said.
When asked about rumours that the company had been given approval to purchase as much as 4 million tonnes of U.S. corn, the spokesman said: "There is no such volume requirement. It (imports) will depend on the market demand and prices."
"We are using both domestic and international markets to source supplies. Imports are becoming a regular occurrence. The key issues are the price and the market demand. As long as the prices are good, we would import."
Sinograin purchased between 3-4 million tonnes of U.S. corn last year, of which the majority was for shipment in the second half of the year.
Official Customs data showed that 1.74 million tonnes of U.S. corn arrived in China in the first quarter of the year, while imports of U.S. corn in 2011 were 1.15 million tonnes.
FEED MILLS, COFCO
U.S. corn will cost 2,100 yuan ($330) a tonne for Sinograin, which is exempted from 13 percent value-added tax and 1 percent import duty, compared with domestic corn offered at 2,500 yuan($400) per tonne in the major consuming province of Guangdong in the south.
"We believe there is quite a big demand for U.S. corn. U.S prices are quite favourable and it is good time to buy," said Li Qiang, a senior analyst with Shanghai JC Intelligence Co. Ltd (JCI).
Sinograin and private feed mills bought nearly 1 million tonnes last week, a majority of which was old U.S. corn crop, traders said.
Even with the 14 percent import duties, prices are also attractive for private feed mills, which have been buying since February and bought nearly 500,000 tonnes of U.S. corn before last week's purchases.
COFCO, the state-owned trading house, is applying for more import quotas from the government on behalf of private feed mills, as some big feed mills have used up their import quotas while others, with small volume cannot make up a full load of panamax-size cargo.
"We are buying from COFCO, which said it is applying more import quotas from the government," said one official with a major feed mill. One U.S. grain exporter said COFCO was holding 1 million tonnes of import quotas. ($1 = 6.3085 yuan) (Editing by Ed Davies and Naveen Thukral)