GM corn rejection unlikely to hurt market

China's rejection of US corn that contains an unapproved genetically modified strain is unlikely to cause major price fluctuations in the domestic or US markets, analysts said.

Quarantine authorities in four provinces have rejected 12 shipments, or 545,000 metric tons, of US corn this month, after detecting a genetically modified variant known as MIR 162 in them, the General Administration of Quality Supervision, Inspection and Quarantine said on Friday.

The quarantine authority first detected the genetically modified variety in a shipment of corn in mid-November, and later made two other notices about the blocking of the imports.

Chinese quarantine authorities are expected to reject more shipments of US corn, but analysts agreed that such actions are unlikely to affect corn prices significantly.

Feng Lichen, president of yumi.com.cn, a web platform for corn information, said, "Compared with the total amount of corn exports in the United States, the amount (that has been blocked) is very small."

Total US corn exports in 2012 exceeded 28 million tons, according to the US Department of Agriculture.

"The impact of the incident would be limited only to the psychological level. In the long term, the price will remain stable," he said.

Xu Xiaomiao, an analyst with SCI International, a commodity market information service organization, said the agency has not seen a major fluctuation in the price of US corn futures.

But the incident could benefit China's domestic corn market in the short term, as farmers there will have an easier time selling their stockpiles, Xu said.

"Typically, Chinese farmers prefer selling their products at the end of the year, and the measure would force corn processors to return to the domestic market," she said.

However, the country is unlikely to see a major surge in corn imports in the next few years, she said.

China has a corn import quota of 720,000 tons annually, and most goes to State-owned food processing companies such as China National Cereals, Oils and Foodstuffs Corp, and China Grain Reserves Corp.

"The customs tax rate for the imported corn within the quota is about 1 percent. Other than that, the rate would be 65 percent," she said.

Currently, 97 to 98 percent of corn in the Chinese market is supplied by domestic producers, she added.

Feng agreed, estimating that corn processors will have to pay at least 400 yuan ($66) more for each ton of corn, instead of using imported corn.

The Office of the United States Trade Representative said on Dec 16 that it is monitoring Chinese rejection of US corn shipments and has urged China to act promptly to approve genetically modified strains of corn, Reuters reported.

The issue was also raised during the China-US Joint Commission on Commerce and Trade on Thursday and Friday. US Agriculture Secretary Tom Vilsack is part of the US delegation headed by US Commerce Secretary Penny Pritzker and US Trade Representative Michael Froman.

Niu Dun, vice-minister of agriculture, said at a media briefing on Friday that the MIR 162 corn hasn't received safety certification from China and thus cannot be imported.

Niu said the Chinese authority will assess the safety of GM corn products after foreign companies seek permission to import such products, and Chinese authorities must then approve the products before they can be brought in to China.

Bi Meijia, spokesman for the Ministry of Agriculture, said in a news conference on Dec 6 that the ministry has received requests for certification of the MIR 162 corn from Swiss biotechnology company Syngenta AG several times since March 2010, but found the experiment data and other materials incomplete.

"The ministry asked the company to supply the missing materials on the principle of caution," he said. The ministry received the latest certification request in November and is still evaluating the product, he added.