China sells 1.1 million tonnes of corn supplies; prices ease

China sold 1.08 million tonnes or nearly 80% of the corn on offer at weekly auctions on Tuesday (Apr 20), with most supplies in the northeast provinces sold; prices were slightly down from last week.

Supplies in north-eastern provinces sold at an average RMB1,702 (US$249.3) per tonne, down 1.6% from last week, with the highest price in Inner Mongolia at RMB1,840 (US$269.5) per tonne, according to bidding results posted on the website of the National Grain & Oil Trade Centre.

The high-volume sale did not pressure domestic physical or futures prices, which were steady up as from Monday (Apr 19) with traders anticipating tight supply. Physical delivery price at Dalian, the largest corn port, remained at about RMB1,940 (US$284.2) per tonne.

Domestic corn prices have risen above imports, prompting some feedmills to seek cheaper supply overseas, although the price gap was still not attractive enough for feedmills.

"The government's temporary reserves, if sold at current volume, could last for two months. Supply in May and June could become tight," said Lu Tianzhang, an analyst with China Zhongzhou Futures Co. Ltd.

Lu said the government held about 10 million tonnes of temporary corn supplies, largely from 2007 and 2008 harvests. Besides temporary reserves, the government still holds normal reserves, the level of which is a state secret.

Rains and snow in northeast provinces have prompted farmers to sell less over the past week and many corn processors have been active in bidding for supply from government sales.

Farmers were still holding a large amount of last year's harvest in anticipation of higher prices.

On Tuesday, bidding for supplies in Hebei, Shandong and Jiangsu, south of northeast producing provinces, were not active. Only half of the 570,000 tonnes on offer was sold at an average price of RMB1,874 (US$274.5) per tonne, about the same as last week. Corn supplies at ports in the major consuming province of Guangdong were high at about 330,000 tonnes by Sunday (Apr 18), according to the China National Grain & Oils Information Centre.