September 24, 2009

Corn prices in China's major producing areas declined slightly in the week to Wednesday as supply concerns eased and due to favourable weather.

Corn prices in Shandong province, a major producer, were RMB1,840 (US$269.45) to RMB1,850 (US$270.92) a tonne, down RMB30 from a week earlier.

In Jiangxi province, prices were at RMB1,920 to RMB1,930/tonne, RMB10 lower.

"Tight supply eased a bit this week due to the release of government corn stockpiles," said Yang Xiaoyun, an analyst with Shanghai Cifco Futures.

The government bought around 4 million tonnes of corn early this year in a bid to shore up the dwindling domestic market, but given that the feedmeal sector has a large appetite for the crop, the government recently began to sell at a RMB150/tonne subsidy to corn processors if they bought from government stockpiles.

That has somewhat alleviated the market tightness, especially since the harvest season for corn is usually around October and old supplies are shrinking. The new crop is due to reach the market only around December.

Meanwhile, analysts said favourable weather also trimmed down some speculative buying triggered by flooding and drought in the past few months.

Looking ahead, analysts said corn prices will likely remain stable in the coming days given sufficient supply from government sales to meet the demand from corn and soymeal processors before the week-long holiday kicks off Oct. 1.

US$1 = RMB6.82 (Sep 24)