June 12, 2010

 

 

China sold 60.4% of corn offered at state auctions in the northeast, the lowest take-up rate after government efforts to cool domestic prices weakened market sentiment, dampening earlier concerns about shortages.

 

Many feedmills were reluctant to bid for more, preferring to wait for price direction after Beijing released strategic reserves this week, a signal to the market that the government was determined to bring corn prices down, analysts said.

 

Beijing sold 597,600 tonnes of corn at weekly auctions in the northeast, at an average price of between RMB1,592-1,670 (US$233-US$244.5) per tonne, lower than an average price of RMB1,679 per tonne at last week's auction.

 

Physical corn prices at Dalian <YC-FOBDLN>, the largest port in the northeast, the country's major corn area, also fell 2% since June.

 

Beijing has also vowed to crack down on hoarding of corn and banned corn processors bidding for weekly state reserves as part of efforts to cool domestic prices, which rose to a record level in the northeast last month in anticipation of shortages.

 

"The government's crackdown has cooled down prices. Feedmills were watching where the price would go," said analyst Feng Lichen, adding that many mills had built up enough inventories and needed less from government weekly auctions.

 

Weakening Chinese corn prices could reduce interests for imports after China booked nearly 600,000 tonnes from the US since April, the largest volume in years.

 

US prices for July shipment were RMB1,876 per tonne after tax, 9% lower than domestic price at Shekou port in the major consuming province of Guangdong in the south, said the China National Grain and Oils Information Centre.

 

Analysts also expected domestic prices in the short term to stay weak as both farmers and trading firms were likely to sell more to the market.

 

"Corn prices are likely to weaken in the short term. Farmers from June will sell their last batch of stocks and trading firms will do the same, a time when we could see the lowest price in the year," said Yang Linan, an analyst with Beijing CIFCO Futures Co Ltd.

 

Sunny and warmer weather in the northeast have eased market worries about delayed planting in the region, but the corn crop could still face dry weather later, said Yang.