August 9, 2007

 

China corn prices steady, supported by drought concerns

 

 

Corn prices in China were mostly steady in the week to Wednesday (August 8), supported by concerns over a drought in northeast major producing regions.

 

But analysts said corn supply is likely to remain sufficient, as the drought's impact could be limited and a recovery in demand from the feedmeal sector will be slow.

 

In Jilin, China's largest corn-producing province, prices of average-quality corn were quoted around RMB1,370 to MB1,500 a tonne, unchanged from a week earlier.

 

Prices in Heilongjiang province, another major corn-producing region in the northeast, were at RMB1,300 to RMB1,410/tonne, compared with RMB1,300 to RMB1,400/tonne the week before.

 

Average prices in Shandong province were at RMB1,540 to RMB1,620/tonne, steady from a week ago.

 

Only about 10 percent of the corn acreage in Heilongjiang province is being affected by a rare drought, which is happening during the crucial growing season for corn, soybeans and paddy in north China, said the China National Grain and Oils Information Centre (CNGOIC).

 

Although the local agriculture department has projected a 35 to 40 percent decline in corn output in the eastern part of Heilongjiang province, CNGOIC said "better growing conditions in other areas can make up for the reduced production in drought-hit areas."

 

It kept its corn output forecast unchanged at 149 million tonnes despite the drought.

 

China's corn-growing regions are scattered, with output in Heilongjiang province accounting for 10 to 12 percent of the country's total corn production.

 

Meanwhile, the drought in the central and western part of Jilin province won't be a threat to corn output, as farmers in the province, which is known to experience droughts in "nine years out of 10," have experience dealing with the problem, said analysts.

 

But some industry participants said the recovery of feedmeal demand and industrial demand will help support corn prices in the short term.

 

"It will take several years (for China) before it stops producing ethanol with grains," although the government is aiming for non-grain based biofuels, said the China Corn Network, which publishes industry information on corn.

 

Corn's industrial consumption is expected to reach 37.5 million tonnes in the 2007-08 crop year, up 2 million tonnes or 6 percent on year, according to CNGOIC's report issued Wednesday (August 8).