October 25, 2007

 

China corn prices mostly stable, but under pressure from stocks

 

 

China's corn prices were mostly stable in the week to Wednesday (October 24), but prices in some regions were lower amid ample stocks and weaker demand.

 

Corn prices in Jilin province, a major corn-producing region, were RMB1,400 to RMB1,460 a tonne, compared with RMB1,400 to RMB1,500/tonne a week ago.

 

Corn prices in Heilongjiang province, another major corn-producing region, were RMB1,300 to RMB1,390/tonne, stable from a week earlier.

 

Corn prices in Shandong province were RMB1,510 to RMB1,580/tonne, compared with RMB1,500 to RMB1,580/tonne in the previous week.

 

Traders stayed on the sidelines for more guidance on corn prices amid ample stocks during the ongoing harvest.

 

The government is unlikely to issue new quotas for low-tariff corn exports during the harvest this year - breaking with the practice of previous years - and feedmeal sector demand has declined a bit recently, meaning industrial processing plants will be the major corn purchasers in the near term, said analysts.

 

Although farmers will be reluctant to sell new corn in large volumes under the expectation prices will rise, corn prices may fall later this year on sufficient supply and the government's tightening monetary policies, said the Jiangsu Grain Network.

Looking forward, higher interests rates will discourage traders from buying corn and storing it for speculation, said analysts.

 

The central bank has already raised borrowing costs five times this year in an attempt to cool lending and investment growth and contain inflation. Many economists say more economic tightening measures are needed, such as further interest rate hikes or tax changes to cool the surging stock and property markets.

 

Ample stocks at Guangdong port pushed corn prices in that region to RMB1,650 to RMB1,680/tonne, down RMB40/tonne from a week ago.

 

More corn arrivals will likely drive corn prices in Guangdong province lower, said Dalu Futures.