China corn price stable, supported by government auction price

 

 

Corn prices in China's major producing areas were mostly stable in the week to Wednesday (July 29), supported by the government's auction price.

 

Prices in rural areas in Heilongjiang province, a major producer, were between RMB1,440 (US$210.78) to RMB1,560 (US$228.35) a tonne, unchanged from a week ago. They also remained at the previous week's s level of between RMB1,480 to RMB1,550/tonne in Changchun in Jilin province.

 

Prices in some key sale centres and producing areas located in the east were slightly higher on tightening supply as government sales were focused in north and northeast producing areas.

 

The government sold 928,300 tonnes of corn from its reserves Tuesday in the north and northeast, 48 percent of the 1.94 million tonnes it planned to sell. It sold 745,900 tonnes a week ago.

 

"The increased volume showed there were many traders (keen on buying) staying on the sidelines last week to watch for" how the government's decision will guide the market, said Ding Lei, an analyst with state-owned Jilin Grains Centre.

 

He said the demand will help support cash prices.

 

The average sale price was RMB1,590/tonne, lower than last week's RMB1,600/tonne.

 

Analysts said the lower price was because of inferior quality rather than higher supplies.

 

"The government sales didn't push prices lower. On the contrary, they supported the cash prices by setting a floor price," said Wang Cheng, an analyst with Nanhua Futures Co.

 

The base auction price was set at RMB1,550/tonne, close to market prices, leaving little room for cash prices to decline.

 

Tightening availability also helped support the prices, as government controls most of the supply.

 

Still, more than 30 million tonnes of reserves mean prices may not rise much either as the government can boost sales if demand increases, said analysts.

 

US$1 = RMB6.83 (July)