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New Threat to Battered Global Market Posed as China Set to Export Corn: Reuters

New Threat to Battered Global Market Posed as China Set to Export Corn: Reuters
In a radical move by the world's No. 2 producer to cut its ballooning surplus and unleash more supply into a saturated global market, China has given approval to at least two companies to export corn, reported Reuters citing trading sources.
Top grains trader Cofco and major processor and trader Beidahuang, have been allowed them to sell grain abroad as the Chinese government has issued permits to the two state-owned companies in what could be the first bulk exports in a decade.
One of the trading sources who had spoken to one of the exporters reportedly told Reuters that the greenlight was for around 2 million tonnes of corn to be exported by three state-owned companies. A foreign company which is in discussions with one of the approved exporters had been talked to by a second source, said Reuters.
Directing questions to the state planer, the National Development and Reform Commission (NDRC), a spokesperson for China's commerce ministry said the permits were not its responsibility.
The NDRC did not respond to requests for comment.
As China struggles with a massive grain surplus and prepares to harvest a bumper crop, its first in almost a decade without government price support, traders and analysts said exports have been increasingly likely.
Chinese corn prices are expected to fall further towards international benchmarks and have slumped more than 20 percent in the past year.
Increasing competition at a time when record harvests are predicted in many regions, sales abroad would spook major exporters such as Brazil and the United States even if quantities are limited at first. China might be allowed to compete against the Americans and others with lower freight costs as five of the top ten largest corn importers are in Asia.
Amid an intensifying spat between China and the United States over trade in everything from grains to aluminum, the potential sales could be another thorn.
In 2006/07, when it sold almost 5 million tones, was the last time that China last exported significant volumes of corn. Purchases of cheaper grain from overseas was stoked after a state stockpiling scheme pushed domestic prices way above the global market and since then China has become a major importer.
And after abandoning the program this year, Beijing is struggling to offload a corn stockpile estimated at nearly 240 million tonnes - much of it poor quality due to its age. And next month, China's crop of nearly 220 million tonnes is set to hit the market.
He had recently been approached by a Chinese exporter testing appetite for corn in neighboring markets, a Singapore-based trader reportedly told Reuters.
"To attract buyers they will have to offer lower prices than what they are getting from the Black Sea region and South America," said another trader in Singapore, reported Reuters.
South Korea, which has been in the market this week and paid as little as $183 a ton for January delivery, could be a logical target for China to sound out interest as a big corn consuming country nearby. Down from about 1,650 yuan in mid-June, Chinese corn prices this week stood at around 1,400 yuan ($210) a ton.

Christopher J. Mitchell

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