Voluntary Report - public distribution

**Date:** 3/21/2005

**GAIN Report Number:** CH5026

CH0000

**China, Peoples Republic of**

**Grain and Feed**

**Corn Trade Update**

**2005**

**Approved by:**

![](media/image1.wmf)Ralph Gifford

U.S. Embassy Beijing, Office of Agricultural Affairs

**Prepared by:**

Ralph Gifford and Jiang Junyang

**Report Highlights:**

Post has raised its estimate of China's MY04/05 corn exports to 6 mmt
from the previous estimate of 4.5 mmt, as a result of more government
support and favorable freight rates to nearby Asian markets. In
February, the National Development and Reform Commission issued 3 mmt of
corn export quota: trade sources believe even more than 3 mmt already
has been contracted and is expected to be shipped by the end of June. It
is likely that an additional quota for the second half of the calendar
year will be issued later, as happened in 2004. Trade sources estimate
the total corn export quota for 2005 will be around 5 mmt. Because of
near record corn output in 2004, the central and provincial governments
are under pressure to prevent corn prices from falling, therefore, are
increasing support for corn exports.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Beijing \[CH1\]

\[CH\]

According to trade sources, the National Development & Reform Commission
(NDRC) in February issued 3 mmt of corn export quota. This is the first
that corn export quota this year. The quota is distributed among six
provinces and two state grain traders including Jilin, Heilongjiang,
Liaoning, Inner Mongolia, Hebei and Shanxi provinces, as well as the
Jilin Grain Corp. and COFCO (China National Cereals, Oils & Foodstuffs
Corp.).

  --------------- ------- -------------- --------------- ---------- ------- -------- ------- --------
  Corn Export                                                                                
  Quota                                                                                      
  Allocation for                                                                             
  January-June,                                                                              
  2005 (In 1,000                                                                             
  MT)                                                                                        

  Total           Jilin   HeilongJiang   InnerMongolia   Liaoning   Hebei   Shanxi   COFCO   Jilin
                                                                                             Grain

  3000            1500    350            260             180        50      60       300     300

  From trade                                                                                 
  sources                                                                                    
  --------------- ------- -------------- --------------- ---------- ------- -------- ------- --------

The Chinese government controls corn exports through a quota licensing
system. Based on its evaluation of grain supply and demand, NDRC decides
the timing and size of the quota. For instance, in 2004 NDRC issued 1.4
mmt of corn export quota in the first half of the year and then 3 mmt
more in the second half. Actual exports totaled 2.3 mmt in 2004. The
unused quota for CY2004 still could be valid if cargoes are shipped by
end of March 2005, according to trade sources.

In MY04/05, China exported 921,000 mt of corn through January, according
to Customs data. Trade sources estimate that China's corn exports in
February would be the same level as in January, or about half a million
tons.

Following near record corn production in 2004, prices in producing
regions have drifted downward since the harvest. Both central and
provincial governments are under pressure to offer more support on corn
exports to prevent the price from declining further.

![](media/image2.wmf)

Source: China National Grain & Oil Information Center

Corn exports are entitled to a rebate of the 13 percent Value-Added Tax
(VAT). Rather than a contract price, the rebate is calculated from a
fixed base price. For 2005, the base price has been increased from
860RMB/ton to 1100RMB/ton, raising the VAT "rebate" from 112 to 143
RMB/ton. In addition to increasing the rebate on corn exports, some
provincial governments reportedly also offer incentives to export to
reduce corn stock levels and lower provincial storage costs. Except for
favorable rail cargo rates, which have been acknowledged by the
government, other support is very difficult to quantify.

Following its accession to the WTO, China stated that it did not and
would not subsidize exports in violation of WTO rules. Many analysts,
however, believe that through VAT rebates and other schemes, Chinese
corn exports are subsidized.

Other than a few thousand tons of border trade, China does not import
any corn. Following is an estimate on corn import costs calculated by a
trade source. As it shows, the cost for imported U.S. corn still exceeds
domestic corn prices.

+--------------------------+-----------+------------------------------+
| **China's Corn Import    |           |                              |
| Cost Calculation**       |           |                              |
|                          |           |                              |
| **(\$1= RMB8.2765)**     |           |                              |
+--------------------------+-----------+------------------------------+
|                          | **Prices  | **Prices in \$/ton**         |
|                          | in        |                              |
|                          | RMB/ton** |                              |
+--------------------------+-----------+------------------------------+
| **FOB at the U.S. Gulf** | *         | **\$84.45/MT for March       |
|                          | *819.85** | shipment**                   |
+--------------------------+-----------+------------------------------+
| 1 CBOT Settlement Price  | 689.91    | March 14 Quote, \$2.145/Bu   |
+--------------------------+-----------+------------------------------+
| 2 Basis                  | 129.94    | \$15.70/MT                   |
+--------------------------+-----------+------------------------------+
| **CIF**                  | **        | **\$167.06, pre-tax cost**   |
|                          | 1382.72** |                              |
+--------------------------+-----------+------------------------------+
| 1 Ocean Freight Rate     | 550.47    | \$66.60/ton                  |
+--------------------------+-----------+------------------------------+
| 2 Insurance              | 12.4      | \$1.50/ton                   |
+--------------------------+-----------+------------------------------+
| **Tariffs and VAT**      | *         | **\$23.38**                  |
|                          | *193.58** |                              |
+--------------------------+-----------+------------------------------+
| 1 Customs Duty           | 13.83     | 1%                           |
+--------------------------+-----------+------------------------------+
| 2 VAT                    | 179.75    | 13%                          |
+--------------------------+-----------+------------------------------+
| **Miscellaneous Costs**  | *         | **\$14.6%**                  |
|                          | *120.87** |                              |
+--------------------------+-----------+------------------------------+
| 1 Bank Service Fee       | 2.07      | 0.15% of pre-tax cost        |
+--------------------------+-----------+------------------------------+
| 2 Charges by the Port    | 45        |                              |
+--------------------------+-----------+------------------------------+
| 3 Commission Fee         | 10        |                              |
+--------------------------+-----------+------------------------------+
| 4 Customs Declaration    | 1         |                              |
| Fee                      |           |                              |
+--------------------------+-----------+------------------------------+
| 5 Commodity Inspection   | 3.45      | 0.25% of pre-tax cost        |
| Fee                      |           |                              |
+--------------------------+-----------+------------------------------+
| 6 Phytosanitary          | 6.09      | 0.45% of pre-tax cost        |
| Inspection Fee           |           |                              |
+--------------------------+-----------+------------------------------+
| 7 Insurance              | 6.77      | 0.5% of pre-tax cost         |
+--------------------------+-----------+------------------------------+
| 8 Packaging Fee          | 25        |                              |
+--------------------------+-----------+------------------------------+
| 9 Losses                 | 4.14      | 0.3% of pre-tax cost         |
+--------------------------+-----------+------------------------------+
| 10 Interests Payment     | 17.35     | based on pre-tax cost,       |
|                          |           | three-month interest rate of |
|                          |           | 0.4425%                      |
+--------------------------+-----------+------------------------------+
| **Grand total cost**     | **1       | **\$205.05/MT**              |
|                          | ,697.17** |                              |
+--------------------------+-----------+------------------------------+
| Source: Jilin Grain      |           |                              |
| Group                    |           |                              |
| [                        |           |                              |
| http://www.jlol.net.cn]( |           |                              |
| http://www.jlol.net.cn/) |           |                              |
+--------------------------+-----------+------------------------------+

# 

  ----------- ----------- ----------- ----------- --------------------------
  **China:                                        
  Corn                                            
  Exports by                                      
  Month                                           
  Oct.-Jan.                                       
  MY04/05 (in                                     
  1,000 MT)**                                     

  Oct 2004    Nov 2004    Dec 2004    Jan 2005    Total

  49          43          343         485         921

  China                                           
  Customs, HS                                     
  Codes:                                          
  100590,                                         
  100510                                          
  ----------- ----------- ----------- ----------- --------------------------

  --------------- ----------- ----------- ----------- ----------- -----------
  China: Corn                                                     
  Exports by                                                      
  Destination                                                     
  MY04/05 (in                                                     
  1,000 MT)                                                       

                  **Oct       **Nov       **Dec       **Jan       **Total**
                  2004**      2004**      2004**      2005**      

  **World**       49          43          344         485         921

  **Korea,        12          0           243         357         612
  South**                                                         

  **Malaysia**    21          14          58          80          173

  **Japan**       12          26          37          42          116

  **Hong Kong**   1           2           4           2           9

  **Korea,        3           2           1           5           10
  North**                                                         
  --------------- ----------- ----------- ----------- ----------- -----------

# PS&D Table

+----------------+------+------+------+------+------+------+--------+
| **Country**    | Ch   |      |      |      |      |      |        |
|                | ina, |      |      |      |      |      |        |
|                | Peo  |      |      |      |      |      |        |
|                | ples |      |      |      |      |      |        |
|                | Repu |      |      |      |      |      |        |
|                | blic |      |      |      |      |      |        |
|                | of   |      |      |      |      |      |        |
+----------------+------+------+------+------+------+------+--------+
| **Commodity**  | Corn |      |      |      | (    |      |        |
|                |      |      |      |      | 1000 |      |        |
|                |      |      |      |      | HA)( |      |        |
|                |      |      |      |      | 1000 |      |        |
|                |      |      |      |      | MT)  |      |        |
+----------------+------+------+------+------+------+------+--------+
|                | **20 | **R  | **20 | **Es | **20 | **Fo | *      |
|                | 03** | evis | 04** | tima | 05** | reca | *UOM** |
|                |      | ed** |      | te** |      | st** |        |
+----------------+------+------+------+------+------+------+--------+
|                | **   | **   | **   | **   | **   | **   |        |
|                | USDA | Post | USDA | Post | USDA | Post |        |
|                | Offi | Esti | Offi | Esti | Offi | Esti |        |
|                | cial | mate | cial | mate | cial | mate |        |
|                | \    | \    | \    | \    | \    | \    |        |
|                | [Old | [New | [Old | [New | [Old | [New |        |
|                | \]** | \]** | \]** | \]** | \]** | \]** |        |
+----------------+------+------+------+------+------+------+--------+
| ###### Mar     |      | 10-  |      | 10-  |      | 10-  | M      |
| ket Year Begin |      | 2003 |      | 2004 |      | 2005 | M/YYYY |
+----------------+------+------+------+------+------+------+--------+
| **Area         | 2    | 2    | 2    | 2    | 0    | 2    | (1000  |
| Harvested**    | 4068 | 4068 | 4500 | 4500 |      | 5300 | HA)    |
+----------------+------+------+------+------+------+------+--------+
| **Beginning    | 6    | 6    | 4    | 4    | 3    | 4    | (1000  |
| Stocks**       | 4973 | 4973 | 3852 | 8752 | 4952 | 5852 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Production** | 11   | 11   | 12   | 13   | 0    | 12   | (1000  |
|                | 5830 | 5830 | 8000 | 0000 |      | 2000 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **TOTAL Mkt.   | 2    | 2    | 100  | 100  | 0    | 1000 | (1000  |
| Yr. Imports**  |      |      |      |      |      |      | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Oct-Sep      | 2    | 2    | 100  | 100  | 0    | 1000 | (1000  |
| Imports**      |      |      |      |      |      |      | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Oct-Sep      | 1    | 1    | 0    | 0    | 0    | 500  | (1000  |
| Import U.S.**  |      |      |      |      |      |      | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **TOTAL        | 18   | 18   | 17   | 17   | 3    | 16   | (1000  |
| SUPPLY**       | 0805 | 0805 | 1952 | 8852 | 4952 | 8852 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **TOTAL Mkt.   | 7553 | 7553 | 4000 | 6000 | 0    | 3000 | (1000  |
| Yr. Exports**  |      |      |      |      |      |      | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Oct-Sep      | 7553 | 7553 | 4000 | 4500 | 0    | 3000 | (1000  |
| Exports**      |      |      |      |      |      |      | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Feed Dom.    | 9    | 9    | 10   | 9    | 0    | 9    | (1000  |
| Consumption**  | 8000 | 6500 | 0000 | 8000 |      | 9500 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **TOTAL Dom.   | 12   | 12   | 13   | 12   | 0    | 12   | (1000  |
| Consumption**  | 9400 | 4500 | 3000 | 7000 |      | 9500 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **Ending       | 4    | 4    | 3    | 4    | 0    | 3    | (1000  |
| Stocks**       | 3852 | 8752 | 4952 | 5852 |      | 6352 | MT)    |
+----------------+------+------+------+------+------+------+--------+
| **TOTAL        | 18   | 18   | 17   | 17   | 0    | 16   | (1000  |
| DISTRIBUTION** | 0805 | 0805 | 1952 | 8852 |      | 8852 | MT)    |
+----------------+------+------+------+------+------+------+--------+

## 

## Average corn wholesale price in production region and consuming region

  ----------------------- ----------------------- -----------------------
  **China: Average Corn                           
  Wholesale Prices**                              

  (Renminbi Per Metric                            
  Ton, USD 1.00 = RMB                             
  8.27)                                           

                          Producing Region/1      Consuming Region/2

  January (2004)          1,178                   1,355

  February                1,153                   1,318

  March                   1,185                   1,355

  April                   1,270                   1,415

  May                     1,290                   1,408

  June                    1,293                   1,413

  July                    1,315                   1,440

  August                  1,325                   1,460

  September               1,290                   1,435

  October                 1,200                   1,385

  November                1,140                   1,305

  December                1,120                   1,300

  January (2005)          1,113                   1,275

  February                1,088                   1,243

  /1 Heilongjiang, Jilin,                         
  Shandong, Henan                                 

  /2 Tianjin, Fujian,                             
  Jiangxi, Hubei                                  

  Source: China National                          
  Grain and Oils                                  
  Information Center                              
  ----------------------- ----------------------- -----------------------