January 27, 2011

China's corn prices stable ahead of holiday

Corn prices in major producing areas of China were largely unchanged amid sluggish trade in the week to Wednesday (Jan 26), with some corn enterprises and traders suspending corn purchases ahead of the seven-day Lunar New Year holiday from February 2.

Prices in Harbin in Heilongjiang province were around RMB1,860 (US$282)/tonne, unchanged from a week earlier, while prices in Weifang in Shandong province were RMB2,090-2,130 (US$317-$323)/tonne, also unchanged.

China Grain Reserves Corp (Sinograin) has started corn purchases in northeastern China to replenish dwindling state stockpiles, but its bid prices were lower than market prices, according to the sources.

Traders and corn processing companies in Jilin, a major corn producing province, were told to stop purchases to make way for Sinograin, but farmers were reluctant to sell as they expect the post-holiday market to be more bullish and viewed the Sinograin's bid prices as minimum support.

"Corn prices are expected to rise after the holiday, but policy pressure remains the biggest risk," analysts said.

Average corn prices nationwide as of December 31, 2010 were RMB2,116 (US$321)/tonne, up 12% from a year earlier, the Beijing City Grain Administration said in a mid-January report.

Sinograin, which is buying about 10 million tonnes of corn in the northeastern provinces of Heilongjiang, Jilin and Liaoning and the Inner Mongolia Autonomous Region at lower-than-market prices, will expand its purchases of corn to more producing areas, including the provinces of Shandong, Hebei and Henan, sources said.