January 19, 2011

 

China may begin corn stockpile purchases

 

 

China's state grain company, China Grain Reserves Corp, is prepared to restart purchases in the domestic corn market, indicating government's concern over declining national corn stocks.

 

China Grain Reserves Corp's re-emergence in the market would end an unusual, temporary standstill last year as the company, also called Sinograin, halted stockpiling of corn to avoid putting any more pressure on prices that were already sharply higher, especially in the first half.

 

"It hasn't been officially announced yet, but the market knows as much that Sinograin is back in the market, though we don't know the price they are offering," an industry member said.

 

Sinograin's planned purchases from China's north-eastern corn-producing provinces of around nine million tonnes would be only of domestic corn and not imports, he said.

 

China's Ministry of Agriculture said the last year's autumn corn harvest rose about 5% to 172.5 million tonnes.

 

Officials have been adamant that the country has sufficient corn reserves, maintaining that its ability to maintain domestic corn supply is more than adequate.

 

But some industry participants, notably including the chief executive of a major Dalian grain company, openly questioned these assumptions last year, projecting that China's corn reserves were in fact being sharply eroded.

 

The government has released about one million tonnes of corn nearly every week since May last year. In October, it said that it had sold about 23 million tonnes from its reserves.

 

It is not clear yet how much corn Sinograin can secure when it does start buying again, as grain prices continue to face inflationary pressures.

 

While the industry participant said stockpile purchase price offers were not confirmed yet, it was suggested the possible going market rate for corn is around RMB1,860/tonne (US$282/tonne) in Jilin province and RMB1,900/tonne (US$288/tonne) in Liaoning province.

 

It was also said in a report that Sinograin's purchases may come in instalments and that it may stop if there are signs that those purchases are contributing to more inflation.