November 18, 2010

China corn prices climb on strong fundamentals

China's corn prices in major producing areas rose slightly in the week to Wednesday (Nov 17) due to tight state stocks and rising demand from feed millers and corn processors.

Corn prices in Yushu, Jilin province, were around RMB1,480 (US$222) a tonne, about RMB20 (US$3) higher than a week earlier.

Prices in Qinggang, Heilongjiang province, were at RMB1,380 (US$207)/tonne, up around RMB20-40 (US$3-$6).

Cash prices of corn may continue their steady climb in the coming weeks due to a shortage of supply, experts said.

"The good harvest this year still can't offset the supply gap from production cuts last year due to weather factors, so the corn market will be in deficit in the near and medium term," an analyst said.

Tight supplies and expectations of higher prices have also led farmers to hold onto their produce rather than sell in the spot market, he said.

A recent rally in prices of agriculture futures has also underpinned the spot market. Agriculture prices on the Dalian and Zhengzhou bourses have rallied sharply in the last month due to supportive supply-and-demand fundamentals.

A visit to Argentina by China's farm minister has helped mend relations strained by a recent boycott of Argentine soyoil, highlighting Beijing's drive to bolster trade ties with a major global food exporter.

As a top world grains supplier, Argentina is a strategic trading partner for commodity-hungry China. It is already a key market for Argentine soy, and growing Chinese investment in the agricultural sector points to rising trade flows.