September 2, 2009

China sold 1.92 million tonnes of corn from state reserves, out of 2.5 million tonnes on offer at the weekly auction on Tuesday (Sep 1), the largest amount sold since the country begun the sales in July.

In Inner Mongolia and Liaoning, two of the regions hit by the most severe drought in half a century, corn was sold at the highest price of RMB1,690 (US$247.4) per tonne.

Chen Mengshan, spokesman for China's agricultural ministry, said the drought in the country's major grain growing areas in the northeast has affected large swathes of farmland during a key crop growing period, with corn, rice and soy crops in some areas suffering serious damages.

However, Chen added that the country's overall autumn harvest was still likely to be good barring a major weather disaster this month.

Meanwhile, analysts who have visited the drought-stricken provinces of Liaoning and Inner Mongolia said that corn output could fall by 30 percent in areas even with water irrigation facilities.

Areas with no irrigation would yield no harvest at all, according to a report issued by the Dalian Commodity Exchange.

With China's last year corn harvest hitting a record 166 million tonnes and coupled with weak demand from the feed industry and processors, it led Beijing to build up a temporary stockpile of about 36 million tonnes from last year's harvest.