July 19, 2011

China's northern corn prices rise amid supply strain

Corn prices at ports of northeast China continued to rise moderately in the week ended July 17 on tight supply before new corn reaches the market, while large grain enterprises' reluctance to sell also helped push up prices.

Northeast China, which covers Liaoning, Jilin and Heilongjiang provinces, is the country's largest corn production base. Corn prices in Dalian and Jinzhou cities of Liaoning were quoted at RMB2,310-2,320 (US$357-359)/tonne Sunday (Jul 17), up around RMB20 (US$3)/tonne over the previous day.

The domestic corn market usually sees short supply in the third quarter as the crop year's stocks have almost been exhausted while new crops have not entered the market.

Currently, east China's Shandong province, a major domestic corn producer, also started purchases from northeastern areas, which further intensified the supply strain.

In the meantime, major suppliers of port corn in northeastern areas including COFCO, China Grain and Logistics Corporation and Heilongjiang Nongken Beidahuang Business Trade Group were reluctant to sell last week on expectation for higher prices.

Analysts say that with tightening supply, corn prices in north China are unlikely to drop. Meanwhile, as feed enterprises in south China, the marketing regions of corn, are active in purchases stimulated by the government's supportive policies for pig raising, the prices in southern areas are expected to go up in the following period.

The tight supply also had some impact on futures prices. Last week, corn futures price index on the Dalian Commodity Exchange rose 0.76% to RMB2,325 (US$359)/tonne.