May 19, 2011

Corn prices in the major producing areas of China rose in the week to Wednesday (May 18), as processors and traders continued to raise bid prices as inventories with farmers were very low.

Prices in Tieling, in the northeastern province of Liaoning, were up RMB20 (US$3) from a week earlier at RMB2,140 (US$329)/tonne.

Prices in Zouping, Shandong province, home to many big processors and feedmills, rose about RMB40 (US$6)/tonne to RMB2,280 (US$350)/tonne, up about RMB110 (US$17)/tonne from last month.

Traders and processors raised purchase prices to obtain more corn, ignoring the potential policy risks.

The government had sent an inspection team to major producing areas to investigate, as cash corn prices have risen more sharply than those of any other grains this year, driven by high demand.

As of April 30, grain enterprises in 10 major producing areas had purchased 89.5 million tonnes of the corn harvested in 2010, or about 53% of the crop, the State Administration of Grain said in a report last week.

The amount was more than double last year's purchases of 43.1 million tonnes as of April 30, indicating that stocks of corn still held by farmers are small.

Corn prices will find further support as demand from feedmills is increasing as the negative effects of a scandal involving illegal feed additives fades, and soaring pork prices stimulate demand for pig feed, the Zhengzhou Grain Wholesale Market said in a research note.