Corn prices up on speculation China drought may drive grain imports

Corn gained for the first time in three sessions on speculation that a  drought in south-western China may increase the country's imports of agricultural products.

Corn for May delivery rose as much 0.4% to US$3.7225 bushel on the Chicago Board of Trade and traded at US$3.715 at 11:41 a.m. Seoul time.

''In this quiet market, the drought in China may affect futures,'' said Seo Jun Mo, a broker at KB Futures Co. in Seoul. ''The drought is hitting agricultural products in the country and the expectation is that China will increase grain imports.''

China's southwest region is suffering from a harsh drought and water levels in major rivers are at record lows, China's Ministry of Water Resources said on March 11. The drought in most of Yunnan and parts of Guangxi and Guizhou provinces has lasted almost five months, the ministry said.

China consumes about 500 million tonnes of grains a year, with the government keeping stockpiles equivalent to about 40% of demand to safeguard food supplies and control prices, Bao Kexin, president of China Grain Reserves Corp. said.

Prices of several agricultural commodities are skyrocketing in China because of the drought, the South China Morning Post reported.

Demand for corn exceeded production by 3.5 million tonnes this marketing year because of a drought in 2009, according to Jilin Grain Group Co. executive Wang Zheng. China has 21 million tonnes from the previous carryover inventory, Wang said.