September 20, 2007

 

China corn prices stable; outlook firm on talk of lower output

 

 

China's corn prices in major producing regions were little changed in the week to Wednesday, although market participants expect prices to rise on a forecast decline in domestic output this year.

 

In Jilin, China's largest corn-producing province, prices of average quality corn were quoted around RMB1,400 a tonne, little changed from last week.

 

In Heilongjiang province, another major corn-producing region in the northeast, prices were unchanged at RMB1,300 to RMB1,400/tonne.

 

"Although supplies will increase when the new harvest arrives on the market, prices will unlikely be pressured lower as the harvest is forecast to be smaller than expected," said Wang Shiliang, a trader at Jilin Grains Centre.

 

Strong demand for feedmeal has been underpinning prices, although supply is expected to rise as China's farmers will harvest the new crop of corn from the end of September.

 

However, the new corn harvest is forecast to be smaller than in 2006, so traders have been buying actively on expectations of higher prices later this year, Wang said.

 

"The latest survey indicates that unfavourable weather conditions might lead to a reduction of output this year, at least in the northeast region," said a trader based in Jilin province.

 

"That's what people are talking about here, although there are no official statistics saying so," he said.

 

In a monthly report issued earlier in September, China National Grain and Oils Information Centre said corn production is estimated to grow by 2.4 percent to 149 million tonnes, while corn acreage totals around 28.05 million hectares, up 4 percent from 2006.

 

However, expectation of lower output has also lent support to futures traded on the Dalian Commodity Exchange ahead of the new harvest, analysts said.