June 14, 2010

China's corn supply situation is likely to remain tight despite sales from the government's reserves and imports from the US, according to industry participants.

Analysts foresee that there will be shortages, especially towards the harvest season starting from September, as holidays such as the National Day holiday in the second half of the year will boost feedmill demand.

The government has already sold off its temporary corn reserves in the major producing areas of the northeast, and has begun to offer grain from its long-term strategic reserves.

During its weekly auctions Friday (Jun 11), the government sold a total of 597,700 tonnes of corn in the northeast major producing areas, or 60% of the 988,800 tonnes it offered to sell. Around 70% of the corn offered was from central reserves.

The government also sold 368,800 tonnes of the crop in the southern consumption areas, or 64% of the 577,800 tonnes it offered to sell.

However, the market is wondering how long the government can sustain weekly auctions of one million tonnes.

The US Grains Council said in a report Friday that the US could export a huge amount of corn to China over the next few months to help cover the supply shortfall without depleting domestic reserves.

China's corn planting acreage this year is lower than expected due to abnormal rain, snow and temperatures during the spring planting season, the USGC said, after its officials toured the north-eastern major producing provinces of Heilongjiang and Jilin to assess crop production and supply.