July 2, 2009

China will release corn from its huge state reserves, possibly as early as next week, to curtail rising prices that have risen in northern China due to tightening supplies, traders and analysts said on Wednesday (Jul 1).

Sinograin, a Chinese state-owned grain company, which holds more than 30 million tonnes of temporary corn reserves, has delayed the sales which were expected by market participants last month.

Traders said corn prices in Shandong, which has most of China's corn processors, rose 13 percent in June due to increased demand from starch producers.

Meanwhile, traders are expecting the weekly sales to start as early as next week, with bidding prices set at about RMB1,600 (US$234.19) per tonne. The price can partly offset storage costs for Sinograin, which bought the corn from farmers in the northeast at RMB1,500 (US$219.55) per tonne.

On the other hand, China's major corn and soy growing provinces of Jilin and Heilongjiang were affected by rainy weather and low temperatures respectively.

Heilongjiang, the country's largest soy area, had 20 rainy days in the first 28 days in June, the highest rainfall ever during that period, said Chen Zhenlin, spokesman for the China Meteorological Administration. The province, which produces about 40 percent of the country's soy output, was earlier hit by dry weather.

According to Chen, Jilin, which is the largest corn grower in China, recorded an average temperature of 16.4 degrees Centigrade in June, the lowest in the period since 1975.

An analyst with the China National Grain and Oils Information Centre said the bad weather could reduce yields but the impact could be offset if the temperature goes up in July.

Last month, the centre estimated the country's corn output in 2009 to drop two percent to 163 million tonnes, of which Jilin and Heilongjiang produces about 20 percent.