July 13, 2005

China corn prices to continue rising
 

High corn prices on the international market helped lift domestic corn prices in China for the first half of 2005.

Stronger prices are expected on the back of higher rail freight charges, which have increased by RMB0.005/tonne since April. Abnormal weather conditions in China's major corn producing areas are also expected to push prices higher. 

Corn supply sources have also shifted as a result of weather changes. With production in the Yellow/ Huai River region down, the north-east has played an increasingly important role in meeting domestic corn demand.

However, diseases such as the bird flu and foot-and-mouth disease may keep rising corn prices in check.

China's State Cereals and Oil Information Centre estimated that domestic corn output will reach 126.5 million tonnes this year, a 4 percent drop from 2004. Corn imports will hit 1 million tonnes, a drastic fourfold increase from 2004.

Exports are expected to fall by 45 percent, to an estimated 4 million tonnes for 2005-06. Up to May this year, exports totalled 3.01 million tonnes, as 105.5 percent increase year-on-year, according to customs data.

Export rebates for corn are expected to reach RMB143/tonne (US$17.29) from RMB111.8/tonne in 2003-04. China's protective purchase price of corn is thus expected to rise from RMB860 a tonne in 2003-04 to RMB1,100 a tonne.

The first 3 million tonnes of China's corn export quota have been allocated: 1.5 million tonnes for Jilin, 350,000 tonnes for Heilongjiang, 260,000 tonnes for Inner Mongolia, 180,000 tonnes for Liaoning, 50,000 tonnes for Hebei, and 60,000 tonnes for Shanxi.

Corn consumption for feed use will grow to 89.5 million tonnes-up by 2 million tonnes from last year-while total domestic corn consumption will hit 131.05 million tonnes, exceeding China's corn output by about 4.55 million. Existing corn inventories are expected to fill this gap.

On April 12, China's Ministry of Agriculture launched a campaign to encourage the planting of fine grain breeds in major grain-producing areas. So far, subsidies amounting to RMB100 million (US$12.1 million) for 10 million mu (666,667 hectares) of corn-planting area have been set aside.