March 31, 2011

Corn prices in major producing areas of China were stable in the week to Wednesday (Mar 30), as traders have become more cautious with purchases as their stocks are already very high.

Corn purchase prices in Shenyang in Liaoning province were RMB1,990-2,020 (US$303-308)/tonne, unchanged from a week earlier, while prices in Weifang, Shandong, were RMB2,200-2,220 (US$335-338)/tonne, also flat.

Most feed mills kept bid prices unchanged, with some even cutting prices due to the impact of a controversy over the use of illegal slimming additive clenbuterol in pig feed in the central province of Henan, the Zhengzhou Grain Wholesale Market said in a research note.

Corn prices are unlikely to rise sharply, as ongoing monetary tightening is crimping speculative buying in commodities, while many corn users have secured ample supply for the next few months, the grain centre said.

It added that downside risk for corn prices is also fairly limited, due to tight supply and high international prices.

"The biggest fear for the corn market is government's policy tightening," analysts said.

Traders who have a bullish outlook for corn prices have already stocked up, and are wary of the impact of further policy moves on prices, experts added.

China Tuesday sold 108,991 tonnes of feed-grade wheat out of about 300,000 tonnes offered from state reserves, which also helped prevent corn prices from gaining.

The sales volume was relatively low despite attractive prices, suggesting buyers either were not well prepared for the auction or have become bearish on the feed raw material market, analysts said.