* Imports will shrink to 800,000 t - Ag Min
* Local prices at rare discount to international market
* Estimate likely to spook major exporters
By Hallie Gu and Dominique Patton
BEIJING, Feb 9 (Reuters) - China's forecast on Thursday of a drop in corn imports to their lowest in at least a decade may end a years-long bonanza for global merchants and producers as maize prices in the world's biggest grains market have dropped below global prices.
In its monthly crop report, the Ministry of Agriculture forecast imports for the 2016/2017 crop year that ends in September as low as 800,000 tonnes, down 200,000 from last month's estimate.
That would be down from 3.2 million tonnes for the calendar year 2016 and a third of the average for the past decade.
Other estimates, however, point to higher imports for the year. The U.S. Department of Agriculture expects imports at 3 million tonnes and state think-tank National Grain and Oils Information Center estimates 2 million tonnes.
Still, the drop reflects the waning appetite for foreign grain after the government abandoned its longstanding price support programme last year.
It will likely spook global merchants and producers that enjoyed a prolonged boon in business as the world's second-largest economy scooped up foreign crops to feed its growing urban population and livestock.
Removing the price supports has shifted the long-held premium of domestic corn over international prices to a discount.
Last month, Chinese corn traded at a rare discount of 120 yuan ($17.48) to duty-paid imports in southern ports last month, the report said. That is down from a premium of 1,000 yuan per tonne in recent years.
China will eventually need imports once it has reduced its stocks and the price gap may diminish if physical prices catch up with the rally in Chinese corn futures.
The import decline could combine with bumper crops in the United States and other major producers to lower global prices further. U.S. corn futures are languishing close to multi-year lows.
Ukraine accounted for the majority of last year's imports, followed by the United States.
Traders said they do not expect a pick-up any time soon. Meng Jinhui, analyst with COFCO Futures, said the arbitrage should remain in favour of domestic farmers until at least July.
The forecast provides further evidence that 2017 could be a pivotal year for China as Beijing doubles down on efforts to boost domestic demand and curb output to get rid of its ageing reserve and reduce imports.
Chinese corn futures rose to an 18-month high this week on expectations for an inventory decline. Prices have gained 20 percent since Sept. 30.
($1 = 6.8652 Chinese yuan renminbi)
Writing by Josephine Mason; Editing by Christian Schmollinger