Corn auctions fail to dent physical prices in China

China sold almost all the corn on offer at weekly government auctions on Tuesday (May 25) in the northeast but physical market prices continued to rise.

 

Bidding prices slightly eased from the previous auction after the government boosted the sales by 200,000 tonnes to nearly one million tonnes.

 

China sold 979,600 corn out of 993,300 tonnes on offer in the northeast, its major corn area, at an average price of RMB1,724 (US$252) per tonne, slightly down from RMB1,751 (US$256) per tonne last week.

 

But physical market prices kept on rising. Prices at the major port of Dalian in the northeast rose to a record high of above RMB2,000 (US$293) per tonne.

 

"Strong physical prices have indicated a supply shortage. The market prices reflected the demand situation," said Lu Tianzhang, one analyst with Zhongzhou Futures Co. Ltd.

 

Some feedmills, with import quotations and permits, are holding on to sign import deals and watch closely what the government may do next to guide domestic prices, which have risen 10% in Dalian this year.

 

The government could come out with more measures to cool down domestic price rise, after it increased weekly supply and allowed the state-owned trading firm Cofco to import nearly 500,000 tonnes to cool down prices, traders said.

 

"We are not sure over the government attitude over imports and their comments seem to say that supplies are enough and no need for imports," said one feedmill official.

 

Despite a delay in planting of more than 10 days, Heilongjiang province in the northeast, the largest corn supplier, completed seeding last week, said the agriculture ministry.

 

Local governments offered subsidies to farmers to switch to early-matured seeds and encouraged extensive plantings and more fertiliser use to try to ensure a good harvest, said the ministry on its website.

 

The China National Grain and Oils Information Centre said the government figure on corn was in line with the centre's early estimate or at about 163 million tonnes for 2009. While other market participants estimated as low as 140 million tonnes for last year's harvest.

 

China's corn consumption this year was seen rising by five million tonnes to 150 million tonnes, following recovery of feed demand and full operation of corn processors on healthy margins.