February 5, 2009

Corn prices in major production regions in China stayed flat in the two weeks to Wednesday (February 4), as government stockpiling stabilized the market amid post-holiday thin trade.

In the Harbin area in Heilongjiang province, a major production base in the northeast, corn prices were around RMB1,340 a tonne, unchanged from two weeks earlier, before the Lunar New Year break.

Prices in Changchun, Jilin province, another producing region in the northeast, were also unchanged at RMB1,370/tonne compared with two weeks ago.

"Spot corn prices have stayed pretty firm," said Wang Cheng, of Nanhua Futures. "The government's reserve buying has helped. The third wave (of purchases) is now in progress, which has stabilized prices."

Beijing's assurances that it would prop up farming incomes have also helped trading sentiment, Wang said.

The government is stockpiling 30 million tonnes of corn at RMB1,500/tonne.

Trade remained relatively thin after the Lunar New Year, and demand isn't expected to increase significantly, said Ding Lin, an analyst with Shanghai JC Intelligence Co.

"The stocks are sufficient to see market needs through the end of February," Ding said.

As drought talk made media headlines, Wang said the reports may be exaggerated.

"Drought's a concern, of course, but we're not sure just how severe it's going to be," he said. "Every year we see big or small drought reports. When there isn't much news, people use that to move markets."