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China Corn Ban Frustrates U.S. Industry

07/29/2014 @ 2:29pm

How can the U.S. regain the China corn import market? That's the question asked and topic talked about the most at this week's U.S. Grains Council delegates meeting.

During the morning session, in Omaha, Nebraska, speaker after speaker addressed the disruption in U.S. corn shipments to China. The import ban that began in November 2013, following the detection of MIR 162, has caused upwards of $4.0 billion of losses for the corn and soybean industries, according to industry economic studies.

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Syngenta’s product MIR 162 contains a Bt protein that is toxic to a variety of corn pests, principally corn earworm, armyworm, cutworm, and corn borer, according to the Iowa Corn Growers Association. It is approved in important markets including the EU, with the exception of China.

In the last two seasons, MIR162 was planted on about 3% of U.S. acres. It is also approved and planted in Brazil and Argentina.

So what is the trade policy rub? Without any Low Level Presence Policy in China, and given modern testing methods, the grain trade believes that this level is too high to ensure that loads will not have even trace amounts of MIR 162 when they land in China. All the trade can do is post signs at truck dumps and take the risk, the ICGA noted in a statement to farmers.

Darci Vetter, USDA's chief ag negotiator says the agency is attacking the issue at all levels. "We are using our embassy in Beijing, urging China to immediately approve MIR 162, asking the government to follow the science on this issue to make a sound decision. We are asking China to streamline the regulatory process on trait approval. This issue is very important," negotiator Vetter says.

Bryan Lohmar, USGC director of China, says Chinese officials tell him to be patient. "The new policy is being used to liberalize trade, according to the official. Overall, a lot of people are talking about how the corn import issue is being used in China as a political football."

Right now, there is a large import premium into China, and livestock feeders like the quality of U.S. products. "But whether these issues can get resolved is not something that I can speculate on," Lohmar says.  

Lohmar adds, "I don't think China is trying to refigure contracts with this MIR 162 issue. Why not? Because a lot of companies are trying to import corn into China. The competition is stiff."

China's grain stocks

The next question asked, regarding China, is how much corn the Asian country has on hand. USGC experts in China say that figure floats, depending upon whom you talk to.

At this conference, some speakers noted that a private Chinese firm estimated China's 2013/14 corn stocks at 100 million metric tons or above, above the USDA's latest estimate of 77.46 million metric tons. Meanwhile, a Chinese official was quoted in the spring that his country was sitting on 150 million metric tons of corn reserves.

Lohmar told the conference attendees that the USDA's figure is probably close to reality.

After listening to a number of them address the China issue, perhaps one speaker at this industry meeting nailed it by naming the four "known unknowns" in China: It's more profitable to import corn from the U.S. Gulf than to buy it domestically; private forecasters and government agencies differ on Chinese corn demand; private forecasters amongst themselves can't agree on China's corn production; and the difference of estimates for China's corn consumption last year is as wide as 50.0 million metric tons.

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