December 23, 2010

China's corn prices flat amid soft trade

Corn prices in major producing areas of China were largely unchanged in the week to Wednesday (Dec 22), as ongoing concerns over tightening measures to curb inflation kept trade subdued.

Corn prices are confined to a narrow range amid concerns that Beijing could implement further tightening measures, after recently raising commercial bank reserve ratio requirements and putting in place administrative price-control measures. Farmers are reluctant to sell as they anticipate higher prices amid a broad rise in food costs, analysts said.

Corn prices will likely rebound a bit before the Lunar New Year in February, the peak consumption season, as demand from animal feed companies will rise, experts added.

Prices in Jining in Shandong province were around RMB1,900-1,920 (US$286-$289)/tonne, unchanged from a week earlier.

Prices in Changchun, Jilin, were around RMB1,920 (US$289)/tonne, also unchanged.

Domestic corn prices are also receiving support from the US market. Corn for March delivery on the Chicago Board of Trade ended 0.5% higher at $6.0225 a bushel Tuesday due to worries about the impact of inclement weather on the South American crop and falling US acreage.

Demand at a state auction of corn reserves Tuesday increased to 12% of the volume offered, compared with 8% last week, the state-backed China National Grain & Oil Information Centre (CNGOIC), said Tuesday. The average sale price was RMB1,862 (US$280)/tonne compared with RMB1,861/tonne.

The auction results do not reflect the real supply-demand situation on the spot market, due to complicated approval procedures for potential buyers, experts said.

Corn starch and ethyl alcohol makers are not allowed to participate in the auction.