November 16, 2006

 

China's corn prices up but likely to see correction soon

 

 

Corn prices in China's major producing regions drifted slightly up in the week to Wednesday (Nov 15), but rose sharply in major ports and the large consuming regions in the south, market participants said.

 

Active buying by processors and farmers' reluctance to sell at the moment sent prices higher, although a downward correction is likely, in line with corn futures, analysts said.

 

In Jilin, China's largest corn-producing province, prices of average quality corn were quoted around RMB1,220-1,240 a tonne, up RMB40 from the previous week.

 

Prices in Heilongjiang province were quoted unchanged around RMB1,200/tonne.

 

"Industrial processors were the main buyers, while warehouses haven't yet begun their purchase," said Wang Shiliang, a trader at Jilin Grain Centre.

 

"But expectations (that warehouses will soon begin to fill their stocks) already fuelled the bullish market sentiment," he said.

 

Meanwhile, in Guangdong province, one of the largest consuming areas in the south, prices were quoted around RMB1,650/tonne, up from RMB1,500/tonne the previous week, although trading was extremely thin.

 

The rise in prices in Guangdong was due to a shortage of arrivals from the corn-producing provinces in the north, Wang said, adding that prices should see a correction when more stocks arrive.

 

Analysts said although prices are tipped higher as China plans more exports and with state warehouses soon to begin purchasing crops in the north, a possible correction in futures prices will weigh on cash values.

 

"The high prices were partly because farmers were reluctant to sell in anticipation of a further rise in prices, given the bullish sentiment in the futures market," said Zhang Yifan, a trader at China Grains & Oils Group Feed Corp.

 

"But given the recent gains, a correction (in the futures market) may be near, and this will help cool off the spot market," he said.