December 16, 2010

 

China corn prices mixed amid policy pressure

Corn prices in major producing areas of China were largely unchanged in the week to Wednesday (Dec 15), but some areas witnessed slight falls due to government measures to curb inflation.

 

Prices in Dalian, Liaoning province, were around RMB2,050 (US$308)/tonne, mostly unchanged from a week earlier.

 

Prices in Zhoukou, Henan province, were around RMB1,960 (US$294)/tonne, down about RMB20 (US$3)/tonne.

 

The slight decline in prices was mostly a result of the government's measures to control inflation and tighten liquidity, but growing demand from feedmills and farmers' reluctance to sell limited price declines, analysts said.

 

Many farmers are still adopting a wait-and-see attitude to sales, as they expect higher prices and don't need immediate income from grain sales.

 

Demand at a state auction of corn reserves fell sharply this week to just 7.9% of the volume it offered, down from 12% last week, the state-backed China National Grain and Oil Information Centre said Tuesday. Auction prices also fell to RMB1,861 (US$279)/tonne, from RMB1,870 (US$281)/tonne last week.

 

However, corn futures continued to rise in the week to Wednesday, as Chinese investors were still bullish on the long-term outlook and the strong gains in Chicago futures set the trend.

 

The benchmark September contract on the Dalian Commodities Exchange settled at RMB2,335 (US$350)/tonne Tuesday, up RMB44 (US$6), or 1.9% from December 7.

 

Supply and demand is still tightly balanced in the domestic market, and the country is likely to import more corn to satisfy rising demand from animal feed producers, experts said.

 

China imported 1.48 million tonnes of corn in the first 10 months of the year, up from very small levels the previous year. Of the total, 1.43 million tonnes came from the US and six tonnes from Argentina.

 

The country is expected to become a fixture in the global corn market, further tightening global supply, analysts said.