September 16, 2010

 

China guarantees corn supply to meet demand

China is able to guarantee corn supply because supply and demand of the grain are balanced, and because market fundamentals are not conducive to price surge in the second half, a senior Chinese grain official said Wednesday (Sep 15).

 

Zeng Liying, deputy director of the State Administration of Grain (SAG), stressed China is capable of self-sufficiency in food.

 

However, the slight reduction in summer grain output increased the pressure on China's autumn agricultural production.

 

"Despite a few uncertainties in the autumn grain production, we managed to increase the area of land under cultivation," she added.

 

As for corn, supply still exceeds demand in China, as corn production has stabilised in recent years, Zeng said when commenting on the surge in corn prices in recent months.

According to SAG figures, corn prices increased rapidly from March to early May before dropping somewhat in late May after the Chinese government strengthened macro-control of the corn market to curb speculation.

 

But the corn prices started increasing again in June and broke through the RMB2,100 (US$312) per tonne level in August on speculation Chinese inflation will accelerate.

 

"We have abundant corn reserves from good harvests in 2008 and 2009," Zeng said, "So there is no problem for us to supply the market."

 

Zeng attributed the increases in the price of corn in the first half of this year to multiple factors: rising planting costs; increased demand for animal feed; anticipated reductions in output; natural disasters like floods and drought; and a reduction in exports from major corn-producing countries.

 

"We are hopeful for a good harvest this year. Market fundamentals do not support any upward surge in prices," she said.

 

China's imports of corn will remain at a relatively low level this year and won't impact the domestic market in a significant way, Zeng added.