China had stopped importing corn from the U.S. last year due to rising prices. However, it seems that China has struck a deal to resume purchase of U.S. corn. From the Wall Street Journal:
Talk that China had entered the world market spread Thursday, fueled in part by a report from the U.S. Department of Agriculture that private exporters struck deals to sell 116,000 metric tons of corn for delivery to unknown destinations during the 2010-2011 marketing year, which ends Aug. 31.
Traders see several reasons China may have jumped back in the market. It simply may be taking advantage of recent price declines to add more to its reserves. Corn prices in China have surged following an unprecedented buying spree by feed mills due to rising demand from the hog industry, which uses corn for animal feed, according to the China Corn Network, a consultancy tracking the cash market.
China could be accumulating corn in anticipation of demand from Japan, which is expected to increase purchases once it recovers from last week’s devastating earthquake and tsunami. China could make a profit selling U.S. corn to Japan, the world’s top importer of the grain.
Journalist Leslie Brown speculates on the potential consequences of China’s importation of American corn and how it may affect the American consumer. From the Star-Tribune:
If China, which imported about 2 million tons of U.S. corn and wheat combined in 2010, charges into the U.S. grain market, American consumers will find themselves competing with nearly 1.4 billion foreign consumers for the U.S. grain harvest.
That would raise the prices not only of products made directly from grain, such as bread, pasta and breakfast cereals, but also of meat, milk and eggs, which take large quantities of grain to produce. Corn futures have already hit $7 a bushel, up from $2 a bushel five years ago.
Of course, when selling food to China, the United States is dealing with both an economic competitor and a creditor holding $900 billion worth of U.S. Treasury securities.
If China pushes U.S. food prices higher, tensions between the two countries may escalate. An even greater stress may develop between Washington and U.S. consumers, as Americans — who think cheap food is a birthright — are likely to press for restrictions on exports to China.
The U.S. Grain Council, a group advocating for American farmers and American agro-business interests abroad, interprets China’s importation of American corn with a much different perspective. From the U.S. Grain Council website:
“This tranche of U.S. corn exports to China is certainly exciting and should pave the way for continuing imports,” said Mike Callahan, USGC senior director for international operations. “As China’s demand continues to increase, along with its economic growth and urbanization, China is likely to rely more heavily on imports as a way to maintain critical supply and demand balances.”
Thomas C Dorr, USGC president and CEO, says food security with our trading partners is dependent on continuous, transparent and stable trade relationships. “We are hopeful the trade relationship with China will mimic the successful, longstanding relationships the United States shares with other parts of the world,” he said. “This is indeed encouraging news as U.S. corn growers proceed at one of the most rapid paces ever to plant what appears could be another record crop.”