August 30, 2007

China corn prices mostly stable; some higher on tight supply

Corn prices in China were mostly stable in the week to Wednesday (August 29), with prices in some regions higher on concerns over reduced output.

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

In Heilongjiang province, another major corn-producing region in the northeast, prices were at RMB1,350 to RMB1,420 a tonne, up from RMB1,300 to RMB1,400/tonne.

Average prices in Shandong province were at RMB1,540 to RMB1,700 a tonne, compared with RMB1,540 to RMB1,650/tonne a week before.

Analysts expect drought to reduce corn output in northeast China by around 6 million tonnes, contributing to a nationwide decline of 1.4 percent from last year, when output totalled 145.48 million tonnes, according to the China National Grain and Oils Information Centre (CNGOIC).

Grain reserve companies were reluctant to sell, expecting prices to rise on production declines, said Dalu Futures.

Meanwhile, as farmers grew more corn with higher starch for better yields, the output of corn with higher protein, which is good for feedmeal, will be reduced this year, said Chen Wenqing, a senior analyst at China National Cereals Trade Corp.

Less wheat was used as a substitute for corn as feedmeal on rising new wheat prices, which also helped to support corn prices, said analysts.

Overall, corn prices were stronger in south China, especially in Shandong province, due to low stocks, recovered feedmeal demand and tight transportation capacity.