China corn purchase one of its largest

BEIJING – China has made one of its biggest-ever purchases of corn on overseas markets, buying 900,000 metric tons of American corn and showing that growing Chinese demand will play an ever larger role in global grain prices.

The country was a net exporter of corn until 2009 but is now struggling to keep up with growing demand for the grain – which is mainly used in China as animal feed – as incomes increase and people eat more meat.

The U.S. Department of Agriculture announced Thursday that China had made the purchase, which comes despite an expected record grain harvest in China this year. China’s corn consumption probably totaled 176 million tons in the crop year that started Oct. 1, 2010, according to the department .

The purchase was necessary to help fill China’s reserves, Hanver Li, chairman of market research firm Shanghai JC Intelligence Co. Ltd., said Friday.

“China’s harvest is up but that will just about satisfy domestic demand and meanwhile reserves are running low so China needs to import corn to build up their stocks,” he said.

Corn prices on the Chicago Board of Trade have increased about 70 percent over the past two years, though they have eased from near record highs in June.

Li forecast China will import between 7 and 10 million metric tons of corn over the next 12 months. Animals account for about 70 percent of corn consumption in China with the rest used to produce alcohol, corn starch and other products. Only a small amount is directly consumed by humans.