February 19, 2007

 

China's grain prices to consolidate at high levels in 2007
 

 

China's grain prices will largely remain stable this year, although prices are likely to fluctuate due to domestic supply imbalance and high international prices, said a consulting body backed by the country's top economic planner.

 

Corn prices are likely to consolidate at high levels and rise further in 2007, although brief declines are possible, the price-monitoring center under the National Development and Reform Commission said in a report Friday.

 

There are insufficient grain stocks in major grain purchasing regions, while the quantity of rice stocks as a portion of total grain stocks is comparatively low, the center said.

 

As China's soy futures often track international price movements, speculative buying of agricultural products futures and expected tight supply will push up both international and domestic prices, said the report.

 

China is the world's biggest importer of soybeans and gets most of its supplies from the U.S., Brazil and Argentina.

 

The country is a net exporter of corn, but many analysts expect it to soon turn into a net importer of the commodity due to rising industrial demand.

 

Corn can be used to produce ethanol, an alternative fuel.

 

China's ethanol production capacity is only 1.5 million metric tons, most of which is produced using wheat and corn as feedstock.

 

Soybean prices have been surging since late last year amid expectations that soybean acreage will fall this year, as high corn prices have spurred farmers to grow corn instead.

 

Wheat prices are likely to remain stable in 2007, although a slight decline is possible, the center said.

 

Paddy prices will likely rise slightly before harvest season in June, according to the report.