September 2, 2009

China's government sold 1.92 million tonnes of corn during its weekly auctions Tuesday, the highest volume sold since the auctions started July 21, as drought raised concerns about a fall in output.

The volume represented 77 percent of the 2.5 million tonnes it planned to sell. The average price for the corn sold was RMB1,597(US$233.78)/tonne. Prices ranged from RMB1,565 (US$229.10) to RMB1,612 (US$235.98)/tonne in four northeastern and northern provinces.

The continuing drought has pushed cash corn prices up RMB20-RMB30/tonne above the average prices at the auctions, attracting buying interest, analysts said.

Corn output in the northeast could decline around 15 million tonnes this year, tightening supply, but the 30 million tonnes of reserves held by the government may help to stem any surge in prices, said an analyst with a state-owned grain trader, who was just back from a field trip to the major producing provinces of Jilin and Liaoning.

China's corn output last year was estimated at 165.9 million tonnes, up 8.9 percent on year, according to data from China National Grain and Oils Information Centre.

Meanwhile, feedmeal demand picked up as plants refilled their stocks ahead of the National Day holidays and the mid-autumn festival coming in October, and that was also helping to push up local corn prices, said Liu Xinghua, an analyst with Great Wall Futures Co.

US$1 = RMB6.83 (September 2)