February 10, 2011

China's corn prices stable, trading yet to warm up

Corn prices in major producing areas of China were largely unchanged in sluggish trade in the two weeks to Wednesday (Feb 9), as most processing enterprises and traders have yet to start buying due to the week-long Lunar New Year holiday.

Prices will likely rebound soon when business activities return to normal midway through this month, traders said.

Traders are selling corn around RMB1,840-1,850 (US$278-$280)/tonne in the northeastern Heilongjiang province, unchanged from January 26, while prices in Shandong province were around RMB2,100 (US$318)/tonne, also flat.

The central government has begun purchasing corn in Heilongjiang to replenish dwindling stockpiles, bidding RMB1,780 (US$219)/tonne, the local grain administration said last month.

The government's bids are much lower than market prices, indicating farmers will be unwilling to sell, analysts said.

The government may buy about nine million tonnes of corn from the market, while corn processors will soon resume buying as their stocks are falling.

China is unlikely to import huge amount of corn this year as current global corn prices are about RMB3,00 (US$45)/tonne higher than domestic prices, experts added.

"We don't rule out possibility of huge amounts of corn imports when domestic prices are higher," analysts said.

China imported 1.57 million tonnes of corn last year, around 18 times the volume of inbound shipments in 2009, customs figures showed.