|By JANE HOUIN
WASHINGTON, D.C. — Efforts by the U.S. Grains Council (USGC) in collaboration with Ohio Farm Bureau and the Ohio Corn Marketing Program are beginning to see dividends. Last year, the organizations hosted a Chinese delegation, and now one of the Chinese companies represented in the delegation recently imported the first shipment of U.S. corn in years.
The 50,000 metric ton (1.97 million bushel) purchase by private importers, Xiwang Sugar Holdings Co. Ltd., - a private tariff rate quote (TRQ) holder, is cause for excitement at the U.S. Grains Council.
The Council set up the Chinese visit in Ohio last year, and the group visited the farm of Ohio producer Jim Berg, who is on the USGC Board of Delegates and their Asia advisory team. Berg also runs his own commodity brokerage.
“U.S. feed grain producers have been waiting for this development. The Council has been working in China for a number of years and we’re happy to see private importers buying U.S. corn,” said Kenneth Hobbie, USGC president and CEO. “Time will tell if more imports of U.S. corn are contracted, but in the meantime we’re pleased with this first step.”
Recent U.S. corn purchases by private buyers in China are significant. In the past, China’s state trading enterprise, China National Cereals, Oil and Foodstuffs Corp. (COFCO), was singly responsible for all corn imports into China. Currently the minimum access requirement, or TRQ, is 7.2 million tons (283.4 million bushels) for corn under China’s World Trade Organization (WTO) accession agreement. As part of that accession deal into the WTO, the Council pushed for private importers to have a portion of the TRQ allotment annually.
“China’s accession package dictates that 40 percent of the TRQ volume is distributed annually to the private sector with the remainder going to state trading enterprises,” explained Kevin Natz, USGC director of trade policy. “Up until now, the private sector hadn’t purchased U.S. corn because it wasn’t economically feasible. Now that U.S. corn is competitive, the private sector is starting to exercise their ability to import.”
Xiwang Sugar Holdings Co. Ltd. is a large corn processor in Shandong Province, the second largest corn-producing province in China. The company is one of the largest producers of glucose in Asia and used between 900,000 and 1 million tons (35.4-39.3 million bushels) of corn last year, with plans to expand processing capacity to 1.5 million tons (59 million bushels) by the end of this year. Xiwang has a TRQ of 100,000 tons (3.9 million bushels) for 2006, an increase from 51,000 tons (2 million bushels) in 2005.
“The Council identified Xiwang as an important potential customer and has cultivated a relationship with them over the past several years knowing that corn supplies in Shandong were becoming increasingly tight,” said Todd Meyer, USGC senior director in Beijing. “In fact, they attended a Council seminar on futures trading just last week in Shandong. Senior managers of Xiwang also joined USGC teams to the United States in 2004 and 2005.”
The Council correctly anticipated that the first big buyers of U.S. corn would be industrial processors since their purchasing needs are larger than most feed millers. Additionally, processors have wider profit margins, thus making them less sensitive to price.
“Shandong Province is running short on corn,” Meyer added. “This province is vital to the balance of corn in China.”
USGC staff were on-hand to watch that first shipment of U.S. corn to China be unloaded at the Haida Feedmill, another private sector TRQ holder, near Guangzhou. The buyer told Meyer that it was the most beautiful corn he had ever seen. Meyer stressed that these southern China buyers are good contacts of the Council who have participated in team visits to the United States and in numerous USGC activities in China.
“They have four feed mills in Guangdong and use about 30,000 tons (1.18 million bushels) of corn each month,” he added. “They hold a 25,000 ton (984,000 bushel) TRQ and it’s my understanding that they hope to do further trades once these first shipments are cleared.”
The Council has been involved in market development activities to increase feed grain usage in China since 1982. As part of its programming in China, the Council has worked to build China’s livestock, feed and industrial processing industries.
USGC is a private, non-profit partnership of farmers and agribusinesses committed to building and expanding international markets for U.S. barley, corn, grain sorghum and their products. The Council is headquartered in Washington, D.C., and has 10 international offices that oversee programs in nearly 80 countries. Support for the Council comes from its members and the USDA.
This farm news was published in the June 28, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.