April 20, 2004

 

 

China Corn Markets Flat-Up As Sellers Cautious; Planting Underway

 

Corn prices in major producing regions of northeastern China moved up amid thin trading volume in the past week as sellers remained cautious, waiting for prices to rise further, local traders and analysts said Tuesday.

 

In Jilin, China's top corn producing province, normal quality corn was quoted around RMB1,220 ($1=RMB8.277) a metric ton, up CNY20/ton from prices a week ago.

 

As most farmers in northeastern China are busy preparing to plant the next crop, grain movement in the country has been slow in April, traders said.

 

"Farmers are waiting for a rebound in corn prices, and local corn processors want to make more forward coverage," a local grain broker in Heilongjiang said.

 

In March, local corn processors didn't make much forward coverage, expecting prices to drop further, traders said.

 

But the overall bullish outlook in the markets now has prompted end users to increase forward coverage, they said.

 

"Downside room for corn prices is seen limited. That could be the reason for increased buying by local corn processors," said a grain market analyst from a local brokerage house in Beijing.

 

On the production front, corn acreage in northeastern China could be unchanged at best, as the rally in corn prices came too late and probably won't aid planting decisions, local farmers said.

 

"There will be a jump of soybean acreage this year, and rice acreage will also be larger, but corn acreage might (even) be down in Heilongjiang this year," a grain farmer in Heilongjiang said.

 

Corn planting started this week in most of northeastern China.

 

In northern and southern China, however, corn prices were flat or even weaker in the past week, because of sluggish demand from feedstuff producers, as some large end users have covered their needs up to late May, traders said.

 

Average quality corn in Dalian was quoted around RMB1,280-RMB1,290/ton, virtually unchanged from the level a week ago.

 

"Corn stocks at the ports are large, which could add pressure to the local markets," a trader from a local brokerage house in Dalian said.

 

Corn stock at Dalian port was estimated to be around half a million tons, and a high percentage of it had high moisture levels, added the trader. Corn with high moisture levels can't be stored for long periods of time, particularly if the weather is warm.

 

Moreover, sharply lower exports in March damped sentiment, but it is expected the market will gather pace in April, albeit at a low level compared with last year.

 

The expected seasonal recovery in feed demand in May could also lend support to corn prices, traders said.

 

China exported 16,068 tons of corn in March, brining accumulated exports in the first quarter to 1.03 million tons, down 73.6% from exports during January-March 2003, official customs figure showed.