China's corn prices climb on expectations of tightening supply

Corn prices in China's major producing areas were higher in the week to Wednesday (May 26) amid expectations that prices will rise due to tightening supply.

 

Corn prices were around RMB1,780-RMB1,800 (US$261-US$264) a tonne in Gongzhuling and Yushu areas of Jilin province, up RMB20-RMB30/tonne (US$2.9-US$4.4) from a week ago. The prices in Shenyang, Liaoning province, were around RMB1,880-RMB1,900/tonne (US$275-US$278), up RMB20 from a week ago.

 

Traders and processors were building their stocks, while farmers reduced sales as they were busy with spring planting. Appetite for the grain has pushed up prices at the government's weekly auctions.

 

On Tuesday (May 25), the government sold 979,600 tonnes of corn in the north-eastern producing areas, 99% of the 993,300 tonnes it offered, with prices ranging between RMB1,560/tonne (US$228) and RMB1,880/tonne (US$275), compared with RMB1,560-RMB1,860/tonne (US$228-US$272) last week.

 

It also sold 541,400 tonnes of the crop in southern consumption areas, 93% of the 583,400 tonnes planned.

 

Industry participants attending an oil and grain market conference earlier this week said that corn output this year may fall by at least 10 million tonnes due to delayed planting and an adverse weather outlook.

 

Lower corn output last year, estimated at 20 million tonnes by market participants, has already tightened market supply. Still, traders face the risk of falling prices due to high stock levels and government policy changes.

 

Feedmill companies now have corn stocks for at least a month's use, with such stocks totalling an estimated 20 million tonnes, while traders may have about 10 million tonnes of stocks, said a trader with a big feedmill company.

 

Meanwhile, outbreaks of hog diseases, such as blue ear disease, are more serious this year, threatening recovery in feedmill demand, Tangzhishen Investment Management Co. analyst Xia Rui said at the industry conference.

 

Zeng Liying, deputy chief of the State Administration of Grain, said Monday (May 24) at the same conference that the government will sell corn from long-term strategic central reserves if needed after clearing temporary reserves; a third of the central reserves can fully meet market demand, she said.