March 10, 2011

Corn prices in major producing areas of China rose slightly in the week to Wednesday (Mar 9) on strong demand from processing companies and feed mills as well as low stocks held by farmers.

Prices in Changchun, Jilin province, were at RMB1,940-1,960 (US$295-298)/tonne, up RMB60 (US$9)/tonne from a week earlier, while prices in Zhengzhou, Henan province, rose about RMB50-60 (US$7-9)/tonne to RMB2,020-2,040 (US$307-310)/tonne.

Farmers in China's four major producing areas of Heilongjiang, Jilin, Liaoning and the Inner Mongolia Autonomous Region have sold about 65% of their stocks, prompting traders and processors to raise bid prices for the remaining corn in anticipation of tighter supply in the near term, according to the China Corn Network, a consultancy tracking the cash market.

Traders and processors expect a bullish trend for corn prices, but the possibility of reversal in that trend cannnot be ruled out as the government might order starch and alcohol enterprises to stop buying if prices rise too high, the consultancy said.

The government should "resolutely" control the expansion of alcohol and starch industries that use corn in the manufacturing process, said Bao Kexin, general manager of the state grain stockpile.

The country's overall grain stocks are adequate, but corn stocks have some structural problems, he said.

The government should block excessive use of corn in manufacturing as the country has a limited supply of farmland, and corn needs to be used as animal feed, he said.

Corn stocks fell sharply last year because the government sold 27.45 million tonnes of corn from its reserves to ensure supply and keep prices in check.