* Record gap between domestic, global corn prices
* That is pushing buyers to look for cheap imports
* China corn prices supported by forecast of local supply deficit (Adds feed grain price graphic, adds bullet points)
By Dominique Patton and Naveen Thukral
BEIJING/SINGAPORE, Nov 29 (Reuters) - China has bought around 10 to 12 cargoes of mainly U.S. corn in the past month and is set to step up purchases as a record gap between domestic and international prices encourages buyers to seek out cheap imports, three trade sources said.
Overseas purchases by the world’s second-largest corn consumer had plunged in the second half of last year, after domestic supplies became much cheaper following an overhaul in farm policy.
But healthy demand for animal feed and industrial processing, and concerns over supplies have kept Chinese prices relatively high for much of this year, and a rally in recent weeks has helped to push the spread with Chicago corn prices to a record.
“The (import) price is about 300 yuan cheaper than domestic corn,” said a China-based trader with an international firm.
Recent deals are for February, March and April arrivals, he said, priced at about 1,530 yuan ($232) a tonne for corn landed in southern Guangdong province.
“It’s so cheap, there will definitely be more,” he said.
“We expect China to buy more cargoes. They will keep buying as they have the quotas and domestic prices are high,” said another trader with an international trading company in Singapore.
Chinese corn prices are being supported by forecasts of a deficit in supply, after Beijing encouraged farmers to plant less of the crop this year to help get rid of ageing reserves.
The Ministry of Agriculture expects output in 2017/18 to fall to 210.1 million tonnes, leaving a deficit versus demand of 4.3 million tonnes.
Global corn production, though, climbed to an all-time high of 1.075 billion tonnes in 2016/17, hitting records in the past two out of three years, according to data from the U.S. Department of Agriculture (USDA).
High prices for grains like sorghum and feed barley, often used as substitutes for corn in China’s animal feed production, are also supporting demand for corn imports, said the China-based trader.
China has already bought most of the U.S. sorghum crop and bad weather has reduced the barley crops in Europe and Australia, keeping prices firm, said traders.
Australian feed barley to the southern Chinese province of Guangdong is being quoted at 1,780 yuan to 1,800 yuan per tonne, while U.S. sorghum costs 1,800 yuan to 1,820 yuan, according to the China National Grain and Oils Information Center (CNGOIC), a government think-tank.
Chinese domestic corn is selling for at 1,830 yuan per tonne for delivery to Guangdong YC-DEQSHZ, CNGOIC reported.
Many analysts are raising their forecast for China’s 2017/18 corn imports because of the hefty discount on imported corn and high prices of substitutes.
“We adjusted our forecast to 5.5 million tonnes,” said Cherry Zhang, an analyst at Shanghai JC Intelligence Co Ltd.
A feed grain analyst at a Chinese trading firm also estimated imports of around 5 million tonnes.
Those are well above USDA forecasts of 3 million tonnes, up slightly from the 2.46 million tonnes it estimates was imported in the 2016/17 crop year ended in September.
China has imported 2.35 million tonnes of corn in the first 10 months of this calendar year, down 21.5 percent from a year earlier, customs data shows. Almost 1.5 million tonnes of that came from Ukraine. CO-CN-IMP
In China, corn is largely used for feeding the world’s biggest herd of pigs, unlike the United States where 40 percent of the corn production is converted into ethanol fuel.
($1 = 6.5936 Chinese yuan)
Reporting by Dominique Patton in BEIJING and Naveen Thukral in SINGAPORE; Editing by Tom Hogue and Christian Schmollinger