November 25, 2010

State auction holds China corn prices stable

China's corn prices in major producing areas were largely stable in the week to Wednesday (Nov 24), with strong demand offsetting higher availability of grain through government auctions aimed at curbing rising prices.

Prices in Zaozhuang of Shandong province were around RMB1,960 (US$294) a tonne, mostly unchanged from a week earlier.

In Qingdao of Shandong province, prices were around RMB2,090 (US$314)/tonne, also unchanged.

Demand remained strong in the spot market amid the government's attempts to curb rising prices by increasing supply, analysts said.

The government is also buying corn in spot markets to replenish its reserves, after selling substantial quantities in recent weekly auctions.

However, only about 25% of corn offered in the latest auction on Tuesday was sold amid tighter norms for companies buying such corn.

If it weren't for the government's efforts, prices would be rising, but "measures to control inflation are very tough, choking the price rebound," an expert said.

However, strong inflation expectations will drive corn prices higher, he added.

Benchmark September corn settled RMB3 higher at RMB2,286 (US$343)/tonne at the Dalian Commodities Exchange.