August 20, 2010

China runs second corn auction in a week

Speculation over corn futures is likely to cool down as the government announced to offer one million tonnes of corn from the state reserve on Friday (Aug 20), the second corn auction this week, a move rarely seen in recent years.

Of this, 400,000 tonnes will be offered to areas in northeast China including Liaoning, Jilin, Helongjiang, and Inner Mongolia. The remaining 600,000 tonnes will be sold to other regions including Beijing, Tianjin and Hebei.

Earlier on Tuesday, the government offered 397,600 tonnes of reserve corn to the northeastern China market, an amount down 600,000 tonnes from the previous week, fuelling fears that the country's corn reserves are low.

Some 313,500 tonnes of reserve corn was sold Tuesday, accounting for 78.85% of the available offer.

The two times of reserve corn auction in one week indicate the quick response of the government and an effective measure taken to curb the corn price rise.

The corn futures contract, most actively traded on the Dalian Commodities Exchange (DCE), surged to a record high of RMB2,050 (US$302)/tonne, reflecting the fears of insufficient corn supply.

The Chinese government has adopted a raft of measures since May to curb speculation on corn. It requires processors and breeders to use purchases from the reserve corn auction for the sole purpose of production and has capped the amount purchases each time to 30 days' demand, and the accumulative purchase amount to 120 day's demand, for each bidder.