A surge in Chinese corn prices after the government clamped down on the overloading of trucks has boosted demand for cheaper feed grains like sorghum and barley from top exporters the United States and Australia.
Beijing launched a nationwide crackdown on overloading lorries in late September, hitting supplies of corn which usually have to 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 United States 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. Ltd. The government wants to stamp out overloading to curb damage to roads and reduce accidents.
Beijing 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.
U.S. sorghum shipped to south China currently costs around 1,660 yuan ($240) per tonne, said traders and analysts, compared with domestic corn JCI-CORN-SHZH arriving at Shenzhen’s Shekou port for 2,040 yuan per tonne. Feed barley is about 1,500 yuan per tonne.
China has booked more than 20 vessels of U.S. sorghum since late October for arrival by February, said a trader in China, declining to be identified as he was not authorised to speak with media. That would amount to more than 1 million tonnes.
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.
And 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 enquiries.
China is the world’s top sorghum importer and its No.2 importer of barley.
China’s grain markets have been in a state of flux since Beijing this year abandoned a state stockpiling policy that had seen it amass about 250 million tonnes of corn, more than the country can consume in a whole year. It had been looking to offload grain, but suspended auctions to encourage purchasing of new crop corn.
Meanwhile, the China-based trader said that new bookings for corn substitutes may begin to ease as buyers expect more corn to reach southern China soon after the government takes measures to boost transport capacity.
And sorghum prices have strengthened on recent Chinese activity, deterring forward purchases. ($1 = 6.8975 Chinese yuan renminbi)
(Reporting by Dominique Patton and Hallie Gu; Additional reporting by Meng Meng; Editing by Joseph Radford)
(Source – http://uk.reuters.com/article/china-corn-idUKL4N1DI3J9)