August 19, 2009

 

China corn prices up on tight supply; government sales stabilise market

Corn prices in China's major producing areas rose in the week to Wednesday (August 19), with tight supply dominating the market as farmers prepare to harvest a new crop in a couple of months.

 

Prices in Shandong province, a key grower, were around RMB1,820 (US$266.27) a tonne, up RMB80 (US$11.70) /tonne from a week earlier. In the Guangzhou area, they gained about RMB10/tonne to RMB1,810/tonne.

 

Still, the increase was not dramatic or across-the-board.

 

In places such as Jilin province, rates remained mostly unchanged from a week earlier, at around RMB1,590/tonne.

 

"Corn supply is fairly low in Shandong and in other corn selling areas," said Wang Cheng, an analyst with Nanhua Futures.

 

With new corn due to be harvested around October, old supplies are dwindling, Wang said. The new crop is due to hit the market around December.

 

Prices are expected to remain stable in the near term, with weekly government auctions keeping the market on an even keel.

 

The government Tuesday sold about half its targeted sale of 2 million tonnes of reserve corn.

 

"The rising prices have made the government auctions more attractive," Wang said.

 

The government is selling corn at prices ranging from RMB1,490/tonne to RMB1,690/tonne, which first boosted spot prices but is now acting as a market stabilizer.

 

Prices continued to edge up this week because of the time lag in moving the auctioned corn to the market, Wang said.

 

While some research houses, including Standard Chartered, believe that prospects of a severe drought in crop producing areas could prompt more corn imports, from countries including the US, Wang said it's not yet clear if the drought would badly affect supplies, if at all.

 

Wang also said Chinese and US corn are also not regarded as highly substitutable.

 

US$1 = RMB6.83 (August 19)