January 11, 2008

China expects strain in corn supplies for 2008

China's Ministry of Agriculture announced Thursday ( January 11, 2008) that the country may face a strain on corn supplies this year due to a cut in global supplies.

China's corn prices have been basically rising steadily since 2007 and is expected to rise even further as the latest corn harvest hit the market.

Wholesale corn prices have climbed more than 18 percent to reach historic highs for the whole 2007, according to the Agriculture Ministry.

Rising prices, which affected feed and therefore food prices, prompted China's authorities to clamp down on the fledgling interest in the ethanol industry and curb growth in the rapidly growing corn processing industry. 

In mid- December, the government revoked export subsidies and imposed a 5 percent tax on grain exports effective January 1, 2008. Prices has since cooled off.

To prevent prices sliding further, the government recently pledged to buy 4 million tonnes of corn from the grain-producing regions of the north-east to stem falling prices.

For now, global corn output is still staying ahead of demand, with the USDA predicting demand in 2008 at 766 million tonnes while output is a whisker ahead at 769 million tonnes. Output is also growing faster than demand, at 9.3 percent compared to 6.3 percent, according to the USDA.