China to control corn price gains as record levels near

China will not tolerate a surge in corn prices and will enact policies to curb gains, according to Zeng Liying, deputy director of the State Administration of Grain.

 

The country has more than enough corn to meet demand, with just a third of stockpiles ample to cover current consumption, said Zeng, without elaborating. Price gains have been caused by market speculation and do not reflect the fundamental supply and demand situation, said Zeng, who was speaking at a conference in Beijing.

 

China, the world's second-biggest corn consumer, is selling more of the grain from stockpiles as domestic prices trade near record levels after traders increased bets the government may not have enough to meet demand. The country faces a test meeting a crop-output target because of drought in the southwest and a cold winter in the north, Premier Wen Jiabao said in March.

 

The government has sent a very clear and a very strong indication that the country has enough stockpiles and the fundamental supply and demand relationship has not changed, Xu Xiaoqing, deputy director of the Development Research Centre of the State Council, said at the same conference.

 

China, which was forecast to consume 19% of global production this year, may boost overseas purchases, according to data from the USDA.

 

The government will sell 1.58 million tonnes of corn in a weekly auction on May 25, the National Grain & Oil Trade Centre said on May 21. That compares with 1.38 million tonnes on May 18, according to Bloomberg data. China's corn consumption this year may be 150 million tonnes, Zeng said.

 

The country's stockpiles at the end of the 2009-2010 marketing year will probably be 48.7 million tonnes, giving a stockpile-to-usage ratio of 30%, the highest level in the world, according to Cngrain.com, owned by China National Grain Reserves Corp., the country's grain reserve manager.

 

Corn for September delivery on the Dalian Commodity Exchange declined 0.4% to RMB1,970 (US$288) a tonne on May 24 at the 11:30 a.m. local time break. The contract earlier gained 0.4% to RMB1,984 (US$291), just RMB6 (US$0.9) less than a record RMB1,990 (US$291) on May 12, 2008. The most-active contract has surged more than 11% in the past six months.

 

China's farmland area will fall to 119 million hectares this year and to 109 million hectares by 2020, said the State Council's Xu. The decline is being caused by urbanization, industrialization and a lack of water, Xu said.