August 26, 2010

China corn prices mixed as government seeks stability

Corn prices in China's major producing areas fell slightly in some areas and stayed flat in others in the week to Wednesday (Aug 25) as the government sought to contain inflationary pressures from questions over the sufficiency of state corn reserves.

Prices in Harbin in Heilongjiang province were around RMB1,850-1,900 (US$272-$279)/tonne, down RMB40-50 (US$5.88-$7.35) from a week ago, according to reports.

Prices in Changchun in Jilin province were around RMB1,800-1,840 (US$265-$271)/tonne, largely unchanged from a week ago.

Global corn demand is on the rise again, boosted by scarcity in wheat supplies because of defaults by wheat exporters in the Black Sea region.

In China, however, the government has reacted swiftly with a show of strength to keep prices stable after remarks by Zheng Chunfeng, chief executive of Dalian Northern Grains Exchange Market Co., that China had insufficient corn reserves sent prices soaring.

The government responded last week when Shang Qiangmin, director at the state-backed China National Grain and Oils Information Centre, announced that the government has enough corn reserves to meet market demand.

The government followed up by releasing two million tonnes of corn reserves for auction last week.

Shang added that the national corn stocks are adequate and balanced with demand, and that the state has sufficient regulatory measures, so market participants shouldn't be too bullish.

An auction of part of the state corn reserves, held in Heilongjiang province Tuesday, met with high demand, with 93% of the offered volume snapped up.