Vilsack sees China's purchases of US corn rising again, urges end to over-reliance on single markets

By Andrea Shalal and Leah Douglas

WASHINGTON (Reuters) -U.S. Agriculture Secretary Tom Vilsack on Wednesday said China took advantage of lower prices for corn in Brazil, leading to a nearly 20% drop in U.S. exports to China, but he expected the numbers to rise again over time.

At the same time, he told Reuters in an interview, the U.S. government was working hard to reduce American exporters' over-reliance on China and other big markets and encourage greater diversification.

"The reality is that our market has been a little tight ... and our prices are a little higher than our friends in Brazil and in South America, and so as a result, China is taking the opportunity as they often do, to take advantage of low cost," Vilsack said. "Over time, we'll continue to see a righting and balancing of that."

He made no specific prediction for future corn purchase levels by China.

Exports of U.S. agricultural and related products to China through September totaled about $19.9 billion, the slowest pace in three years and down 18% from the January-to-September period last year, according to U.S. Census Bureau trade data. Exports to all countries are only down 12%.

Vilsack, the former governor of farm state Iowa, underscored the importance of diversifying U.S. agricultural exports.

Vilsack told the President's Export Council on Wednesday that the U.S. Department of Agriculture would start accepting applications for an initial $300 million to help U.S. agricultural exporters break into new markets outside China, Canada, Mexico and the European Union.

The new Regional Agricultural Promotion Program (RAPP) established by USDA in October will provide a total of $1.2 billion over five years to non-profit U.S. agricultural trade groups, state trade groups and agricultural cooperatives to help them tap new markets and expand market share in others.

Vilsack said the middle class was growing in many places across South and Southeast Asia, Latin America, the Middle East and Africa, driving demand for high quality products.

USDA said diversification would focus on three regions - Africa; Latin America and the Caribbean; and South and Southeast Asia - in the first phase of the new program, with $25 million set aside specifically for work in Africa.

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Oilseeds and grains are the top U.S. export to China, accounting for $25.4 billion last year, far ahead of other goods such as semiconductors. But Brazil has been eating into the U.S. share of the Chinese market after harvesting bumper crops of soybeans and corn.