China corn prices to continue escalating

China is to see a continuation of the rise in corn prices which has taken them to record levels in some areas, and reopened the country to significant imports for the first time in 15 years, the country's crop think tank has said.

Chinese corn prices had continued to appreciate, reaching RMB2,200 a tonne at some delivery points, including Chengdu and Ganzhou in the centre of the country, the China National Grain and Oils Information Centre (CNGOIC) said. In addition, prices will continue to increase in June as concerns for shortages keep a squeeze on domestic supplies, the centre said.

The briefing comes amid revived speculation that, thanks to drought, China's 2009 corn crop fell significantly below official figure of more than 160 million tonnes given last year, and the US estimate of 155 million tonnes.

Analysts have pegged the harvest at 140 million tonnes, some 10 million tonnes below demand. And concerns are growing for another below-par harvest in 2010, after cold weather pushed back sowings.

While Beijing has signalled that it has more than enough inventory to cover any shortfall, the 60-million-tonne estimate for reserve stocks that has been stockpiled could quickly get whittled down if some of the private estimates for production and usage end up being realised, analysts have said.

The CNGOIC report also acknowledged talk that Beijing was to approve further corn imports – rumours of which supported Chicago prices this week even as other markets tripped over concerns about Korean hostilities and the eurozone.

Meanwhile, Chinese analysts have forecast that the Chinese government will issue import licences for some 5-6 million tonnes of corn. The country has already bought 600,000 tonnes of US corn over the last six weeks.