January 6, 2011

China's corn prices steady amid low buying interest

Corn prices in major producing areas of China were largely unchanged in sluggish trade over the week to Wednesday (Jan 5), as fodder manufacturers had sufficient stockpiles and farmers were reluctant to sell due to policy tightening concerns.

Prices in Harbin, Heilongjiang province, were around RMB1,860-1,880 (US$282-$285)/tonne, unchanged from a week earlier.
 

Prices in Qingdao, Shandong province, were about RMB2,070 (US$314)/tonne, also stable.

Feed millers' demand for corn is sluggish because they built stockpiles before the New Year, and because feed consumption is likely to fall as more hogs are slaughtered to ensure supplies of meat ahead of the Lunar New Year holidays in February, analysts said.

Stated-owned China Grain Reserve Corp, which operates China's government grain reserves, has yet to start buying corn from farmers to replenish stockpiles depleted by sales of 23.69 million tonnes of corn in 2010.

"Corn prices will get support when the government begins its purchases," experts said, adding that relatively low corn prices and the sluggish corn market provided the government with a chance to buy.

However, the government faces a dilemma as it considers the timing of the purchases, because they will send corn prices higher and increase inflationary pressures.

China's imports of corn are unlikely to see a sharp rise this year, as domestic supply is sufficient to meet demand.

The country imported 1.56 million tonnes in the first 11 months of 2010, compared with a negligible amount in 2009.

Corn output last year was about 172.5 million tonnes, up 5.2% from 2009, the state-backed China National Grain and Oil Information Centre said.