March 19, 2009

China's corn prices in major producing areas were higher in the week to Wednesday (March 18), as market participants competed for dwindling supply.

 

Corn prices in Baicheng in Jilin province, the biggest producer, were around RMB1,520 a tonne, up RMB20 from a week earlier.

 

Corn prices in Harbin in Heilongjiang province were between RMB1,100 and RMB1,160/tonne, up RMB20-RMB40/tonne.

 

The government is on track to buy a total of 40 million tonnes of corn from major producing areas since October, almost one-quarter of the 165.5 million tonnes harvested last year. So far it has bought 70 percent of its planned purchases.

 

The purchases, which will be completed by the end of next month, have pushed domestic corn prices higher.

 

Stocks at big state-owned corn traders are only one-third of levels in the same period last year, as the government controls most of the crop, said a manager at one of the traders.

 

Industrial processing plants in Jilin province have increased purchase prices to attract volume, but farmers have been reluctant to sell due to limited stock on hand, said Jilin Provincial Grain Administration.

 

Meanwhile, feedmeal companies need to replenish their stocks, so they are helping to push prices higher.

 

Corn prices in big consumption areas also rose under pressure from higher prices in producing areas, and it's increasingly difficult to purchase corn as farmers stay on the sidelines in anticipation of higher prices.

 

Corn prices at Guangdong port were between RMB1,660 to RMB1,670/tonne, up RMB20-RMB30/tonne from a week ago.

 

Analysts expect corn prices to rise slightly higher in the near term on reduced supply and higher starch prices, but the upside is limited by sluggish feedmeal demand, and government transfers of corn from producing areas to consumption areas will help to pressure corn prices there.

 

The government has arranged for the transfer of 3 million tonnes of corn from the north to southern consumption areas, and will transfer more subject to demand.