UPDATE 4-China seeks to cut corn, soymeal content in animal feed -sources

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BEIJING, March 18 (Reuters) - China’s agriculture ministry has launched a campaign to lower the content of corn and soymeal in animal feed, according to a document issued this week, which could have repercussions for the global grain trade.

The document, sent to animal feed producers and other government departments, outlines a plan for nutrition experts to draw up guidelines by the end of this month on ways corn and soymeal could be replaced by alternative grains, three industry sources with knowledge of the matter told Reuters.

The Ministry of Agriculture and Rural Affairs did not respond to a fax seeking comment.

The document comes amid a growing deficit of corn in China, which has pushed prices of the grain used largely in animal feed to record highs and triggered a surge in imports by the world’s second-largest consumer.

Customs data on Thursday showed corn imports in the first two months of the year rose 400% to 4.8 million tonnes, while wheat and sorghum imports also surged.

U.S. corn purchases by China have continued as the U.S. Department of Agriculture (USDA) confirmed private sales over the past three days totaling nearly 3.1 million tonnes.

The move also comes after Beijing stepped up its focus on food security as the COVID-19 pandemic raised concerns about its dependence on imports and stability of supplies.

Industry participants said it was not clear how much impact the guidelines would have, however, given that they are not expected to be binding.

“They’ve been headed in the direction of higher protein meal consumption. This may just slow down that path,” said Bill Lapp, president of Advanced Economic Solutions.

Chinese feed mills have already stepped up use of corn alternatives since last year when prices surged. Imports of barley, white wheat, canola and rapeseed have increased.

When it was locked in a trade war with the United States in 2018 China also pledged to slash soymeal content in animal feed in order to cut reliance on soybean imports form the United States.

“It’s easier said than done,” said Darin Friedrichs, senior analyst at StoneX.

Volumes produced of other protein meals such as rapemeal and sunflower meal are a fraction of the global production of soybeans.

“Right now you have Brazil loading over 2 million tonnes of soybeans into vessels every week to ship to China. You don’t have that type of scale and efficiency with other products,” he added.

A recent shift toward more commercial-scale hog production in China has led to more use of soybean meal in rations, not less, according to executives at major feed grain suppliers such as Archer Daniels Midland Co and Bunge Ltd.

The ministry said it wanted to reach a balance in supply and demand of feed grains, and promote greater use of rice, wheat, and other grains, as well as other meals to replace corn and soymeal.

Its animal nutrition committee is due to submit a plan to the ministry’s animal husbandry and veterinary bureau by March 31. The bureau will review and approve the plan by April 10 before making it public, according to the sources, who declined to be identified as they were not authorized to talk to the media.

A move to feed more rice could help China pare its massive and costly-to-maintain rice reserves,

“They are large and expensive to carry,” said Rich Feltes, head of market insights at RJ O’Brien. “At this point it’s speculation ... But rice could be an option for them.” (Reporting by Hallie Gu and Dominique Patton in Beijing, additional reporting by Karl Plume in Chicago; Editing by Jacqueline Wong, Kim Coghill, Jonathan Oatis and Richard Pullin)