China can meet corn demand with reserves

China's supplies of corn are near record high levels and the country can meet demand by releasing one-third of its reserves, which should prevent prices from rising further, according to a top grain administration official.

Zeng Liying, deputy head of the State Grain Administration, told a conference in Beijing that China was expecting 150 million tonnes of corn consumption this year, without providing comparative figures.

That tally with estimates by industry analysts, but officials have not yet given an estimate of last year's harvest, which was damaged by bad weather, leaving a potential gap between supply and demand.

This year's corn planting in north-eastern China was delayed by bad weather, which had raised questions about the new harvest as well.

Talk of a Chinese shortage has helped support US corn <0#C:> prices since early April, especially since US and Chinese officials confirmed that China had made its largest purchase of US corn since 2001.

In the latest confirmation of a corn sale, private exporters reported the sale of 120,000 tonnes of US soy and 118,000 tonnes of corn to China on Friday (May 21) morning.

To dampen price rises and support feedmills, which are trying to meet rising Chinese demand for animal feed, the government has been selling off its temporary reserves, now down to about 7-8 million tonnes.

Zeng said that after selling its temporary reserves, China could dip into its strategic corn stockpiles if necessary. China does not disclose the size of its strategic reserves, but traders have estimated them at 20-30 million tonnes.

She also cited a survey conducted by the China National Grain and Oils Information Centre as saying some corn processors may hold enough supplies to meet three months of their own demand.