February 24, 2006

 

China's Jilin province sells 1.25 million tonnes of old corn stock

 

 

China's northeastern Jilin province sold 1.25 million tonnes of corn at an average price of RMB1,206 a tonne, an official with the auctioneer said Thursday Feb 23.

 

The price was higher than the average price of new corn of around RMB1,150/tonne in Jilin province, China's largest corn producing base, but not totally unexpected, industry players said.

 

The highest bid received was RMB1,310/tonne and the lowest was RMB1,100/tonne, according to Wang Shiliang, an analyst with Jilin Grains Centre, the auctioneer.

 

The floor price was initially set at RMB1,060/tonne but was raised to RMB1,130/tonne in the morning and then to RMB1,160/tonne when the auction began the afternoon session.

 

"This is just to quicken the bidding process, after we found the floor price was set too low," said Wang.

 

As the corn is old, put into stocks during 1998 and 2003, the price reflects the overall bullish sentiment of physical corn prices, said analysts.

 

"To be frank, I don't really understand why the price is so high, although I did expect the auction to post satisfying results," Wang said.

 

He said he expects the auction results to guide the market in the short run, while how the buyers deal with the corn--either processing it or putting it into stock--will have important implications for the market.

 

The auctions are aimed at reducing stocks at warehouses before the arrival of new corn.

 

Corn futures on the Dalian Commodity Exchange settled lower Thursday. The benchmark September 2006 contract settled RMB12 lower at RMB1,481/tonne, after trading between RMB1,469 and RMB1,492/tonne.

 

The total trading volume for all contracts rose to 1,131,882 lots from 1,048,150 lots Wednesday. The total open interest fell 75,560 lots to 806,006 lots. One lot equals 10 tonnes.