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COFCO Turns to Brazil for Corn Import under Russia-Ukraine War





On January 6, a cargo ship sailing from the port of Santos, Brazil, arrived at Machong, Guangdong. The vessel was loaded with 68,000 tons of Brazilian corn imported by COFCO. After completing the strict inspection and quarantine, this batch of feed corn will be quickly delivered to domestic feed enterprises through water and land transportation.


This is the first time that China has imported Brazilian corn by bulk ship, marking the official opening of the Brazilian corn export corridor to China.


The Import Quota for Corn Import in China


Since China joined the World Trade Organization in 2001, it has implemented import tariff reduction policies for major food crops, including corn, while retaining the original import quota management method for corn trade.


In 2002, China’s tariff management measures stipulated that the import quota of corn was 5.85 million tons. China implemented preferential policies for the import tariff of corn. The import volume within the quota will charge only a 1% tariff rate, but for the import beyond the quota, the tariff rate will be as high as 71%. Among the quota, state-owned trade accounted for 68%, and private-owned trade accounted for 32%.


In 2004, China adjusted the import quota of corn to 7.2 million tons, which has continued to this day. At the same time, it altered the tariff rate beyond the quota and reduced it to 65%. It also adjusted the proportion of state-owned and private-owned trade accordingly. China moderately reduces the proportion of state-owned trade and increases the private-owned trade proportion to 40%.


The Fluctuated Corn Trade Scale


The trade scale of China's corn foreign trade has fluctuated greatly since 2000. The export volume of corn dropped from 10.4656 million tons in 2000 to less than 10,000 tons in 2020, while the import volume increased from less than 10,000 tons in 2000 to as high as 11.3 million tons in 2020.


Under the combined influence of the outbreak of COVID-19, the domestic pig industry's large feed demand, and the need for deep corn processing, China's corn imports surged to 11.3 million tons in 2020 at an annual growth rate of 135.91%. In 2021, China's corn import scale climbed to 28.35 million tons, with an annual growth rate of 150.88%.



Source: China Customs


The Diversity of China Corn Import Country


China's corn import channel has changed from the United States as the main import source country to the expansion of multiple import channels.


From 2010 to 2013, the United States provided more than 75% of China's corn import trade volume every year as China's largest corn import trading country.


Since 2014, China has increased the scale of corn transactions with Ukraine. With the continuous improvement and development of China's "Belt and Road" related cooperation platform, Ukraine has become China's largest corn importer after the United States. From 2015 to 2016, China's corn imports from Ukraine accounted for more than 80% of the total corn imports that year.


In 2017, due to climate anomalies and other factors, Ukraine's corn production declined, which indirectly caused China's corn imports from Ukraine to drop sharply, with its imports falling to 1.8218 million tons to 64.37% of China's total imports that year. From 2018 to 2020, the scale of China's corn imports from Ukraine increased yearly with the upward trend of China's total corn imports. By 2020, the import scale reached 6.2976 million tons.


In the first half of 2022, the Ukrainian-Russia War affected the grain exports of Russia and Ukraine, especially Ukraine. In addition, some countries actively restrict grain exports to ensure their supply. International grain prices have risen sharply. Global prices of agricultural products such as wheat, soybeans, and corn have reached historic high levels.


According to the monthly supply and demand report of the U.S. Department of Agriculture in May 2022, the global corn trade volume in 2022/23 is estimated to be 183 million tons, a year-on-year decrease of 7.28 million tons, or a drop of 3.8%. However, Brazilian corn exports increased under such a phenomenon.


On May 23, 2022, the Ministry of Commerce of China released a list of the results of the sixth meeting of the China-Brazil (Spain) High-level Committee held between China and Brazil, including the signing of the "Plant Quarantine Requirements for Brazilian Corn Exported to China" by the General Administration of Customs of China and the Brazilian Ministry of Agriculture(revised edition).


In November of the same year, the General Administration of Customs updated the list of Brazilian corn exporters, marking that the export of Brazilian corn to China officially entered the implementation stage.


"We look forward to strengthening China-Brazil agricultural cooperation and will do our best to introduce high-quality Brazilian agricultural products to China. The trade solves the problem of Brazilian farmers' agricultural product sales and meets China's domestic demand for agricultural products, which is a mutual benefit and a win-win result. In this process, COFCO International, based on a perfect overseas layout, customer resources accumulated over the years, smooth supply channels, rich trade experience, and other advantages, successfully shipped the first batch of Brazilian corn to China." said Ma Tongchao, the person in charge of COFCO International.



COFCO Turns to Brazil and Eyes at the Global Layout


China and Brazil are both developing countries and BRICS countries. The two sides have been increasing economic and trade cooperation for a long time. China is Brazil's largest trading partner, and Brazil is the first Latin American country whose trade scale with China has exceeded 100 billion US dollars.


COFCO, the first batch of grain companies implementing the "Going Global Strategy" of China, has established a complete industrial chain. COFCO has always regarded Brazil as a critical country for its overseas investment layout. Its investment in Brazil has exceeded 2.3 billion US dollars.



 

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