January 5, 2006

 

China's corn prices higher on increased buying

 

 

Corn prices in China were higher in the week to Wednesday, as state-owned purchasing companies built up their inventories, judging that prices will climb further in the short term, said market analysts.

 

The strong level of purchases has driven the prices of new corn higher than that of old corn in major corn-producing areas of northeast China, which is unusual, traders said.

 

In Jilin, China's biggest corn-producing province, the farm-gate price of average quality new corn in some places reached RMB1,100/tonne, up RMB100 from a week earlier, while old corn remained at RMB1,050/tonne.

 

Prices in Heilongjiang province, another large corn producer, were about RMB30/tonne lower than in Jilin, but rose about RMB70/tonne.

 

"To be frank, we do not see a significant increase of demand from feed producers in the future, but state-owned enterprises still purchased a lot to increase their inventories," said Wang Shiliang, an analyst with Jilin Grains Centre.

 

At the same time, the high prices prevented farmers from selling corn, which in turn underpinned prices.

 

Corn is mainly used to produce feed in China.

 

As prices have been driven to high levels, traders are less motivated to buy and then export the corn due to profit concerns, Wang said.

 

But in Guangdong, a major corn-consuming province in southern China, the price of arrivals remained stable at RMB1,310-1,320/tonne.

 

"The situation (high prices in producing areas and stable prices in consuming areas) is likely to result in big fluctuations of prices if it cannot be corrected in time, as corn would not be transported to the south in time," Wang said.