June 9, 2011

Corn prices in major producing areas gained in the week to Wednesday (Jun 8) as inventories with farmers and traders continued to fall and demand from animal feed mills recovered amid high pork prices.

Prices in Weifang city in eastern China's Shandong province rose about RMB10 (US$1.54)/tonne to RMB2,370 (US$366)/tonne. Shandong is home to many animal feed manufacturers and corn processors.

Prices in Tongliao in Inner Mongolia Autonomous Region, a major producer, were about RMB2,220 (US$343)/tonne, up RMB20 (US$3.09)/tonne from a week earlier.

Pork prices are at a three-year high and will stimulate corn demand, China Corn Network, a consultancy tracking cash market, said in a research note.

Traders are offloading inventory amid policy risks, as the government seeks to tighten controls on corn consumption by processors. They have been the main force behind high corn prices this year.

Processors, which produce sweeteners, starch and alcohol, consume about 40% of the nation's total output.

The government sold a total of 177,009 tonnes of corn, or 30% of the weekly offer of 600,000 tonnes, to feed mills in an auction Wednesday, the National Grain and Oil Trade Centre said. In a separate auction of feed-grade wheat, it sold 39,276 tonnes of 300,000 tonnes offered.

Corn prices are expected to stay high for the rest of the year, analysts said, adding that an expected larger harvest this year will not damp prices as demand will likely rise more than output.