China turned away at least 1.45 million metric tons of corn since late November, “substantially greater” than the 908,800 reported by the Chinese government, the National Grain & Feed Association, based in Washington, said in a statement last week.
The grain contained a gene developed by Basel, Switzerland’s Syngenta, called MIR162, allowed to be eaten by people in the United States, as well as in some other countries, which hasn’t been approved by China. The current situation could lead to a grain volume increase in the U.S. and reduce the corn futures prices.
Costs to U.S. corn exporters like Cargill Inc and Archer Daniels Midland Co total an estimated $225 million, not the estimated $427 million reported last week by the Wall Street Journal, according to NGFA.
NGFA assembled the analysis using data from USDA, Census Bureau and information from NGFA and North American Export Grain Association members. NGFA used outside legal counsel to obtain and aggregate company data on corn export sales to China, and believes most 2013/14 marketing year sales are accounted for.
Industry data shows 458,000 mt of cancelled sales and 1.429 mmt of deferred sales. In its analysis, NGFA assumes that deferred sales will be cancelled or rolled to a later marketing year, and uses the sum of rejected, cancelled and deferred corn sales, 3.327 mmt, to figure losses.
NGFA’s analysis shows that corn exporters lost $225 million. NGFA attributes $166 million of that to market price loss on unfulfilled export sales, $44 million of price loss attributed to discounted prices on shipments diverted to other countries, and $15 million demurrage loss.
NGFA created a price model that assumes half of the 3.327 mmt of corn initially intended for China will be used domestically for feed while the other half would add to stocks. Its model estimates national average corn prices would be 11 cents per bushel higher if the Viptera disruption didn’t happen, and the total cost to corn producers is $1.144 billion. It is unknown whether China will approve the trait before the marketing year ends.
Karl Setzer, grain solutions team leader for MaxYield Cooperative in Iowa, said he had heard estimates that China‘s rejections had reduced U.S. corn prices by 10 cents to 20 cents per bushel. He expects more shipments to be turned away because China has an ample supply of corn.
“How do you put a dollar figure on it?” he said. “I expect everything they have with us to be washed out.”
Potential losses from trade disruptions for the next marketing year, which begins on September 1, could range from $1.2 billion to $3.4 billion due to the introduction of Agrisure Duracade into the supply chain, according to NGFA. Duracade will be planted in the United States for the first time this spring.
“There are so many variables at play here that pinpointing any estimate of loss carries a high margin of error,” DTN Analyst Todd Hultman said. “1.45 mmt (53 million bushels) of corn were rejected by China, but some of that corn found homes elsewhere — South Korea, for example.
“Regaining and maintaining access to the corn Chinese import market, as well as preserving access to other U.S. export markets, is critically important to the short-term and long-term prospects of U.S. agriculture,” said Randy Gordon, president of the NGFA. “These export markets are key drivers of producer profitability, current and future economic growth for U.S. agriculture, and achieving global food security.”