March 3, 2011

China's corn prices up on state stockpile, processing demand

Corn prices in major producing areas of China rose slightly in the week to Wednesday (Feb 2), as starch and alcohol companies, as well as state stockpiler China Grain Reserve Corp replenished stocks.

Prices in Changchun, Jilin province, were at RMB1,860-1,880 (US$283-286)/tonne, up RMB20 (US$3)/tonne from a week earlier, while prices in Bengbu, Anhui province, rose RMB20-30 (US$3-4)/tonne to RMB2,110-2,130 (US$321-324)/tonne.

Prices rose more slowly than in the previous two weeks after the Lunar New Year holiday as processors showed some restraint, fearing that further aggressive buying would trigger a new round of crackdowns to limit inflation.

In Shandong, a major corn-consuming province and home to a lot of starch and alcohol companies, purchase prices were unchanged from the previous week. Corn prices in the province rose about RMB50-80 (US$7-12)/tonne in the two weeks after the holiday.

Farmers and traders are reluctant to sell their stocks, expecting prices to go up further, the China Corn Network, a consultancy tracking physical corn markets, said Wednesday.

Traders with large corn stocks might face policy risks in the future, as combating inflation is a top priority for the Chinese government this year.

The government has asked major corn processors in northeastern China's Heilongjiang, Jilin and Liaoning provinces to suspend corn purchases to make way for the government stockpile.

Beijing plans to buy about 10 million tonnes of corn to replenish its dwindling stocks this year, reports said. China Grain Reserve Corp sold about 30 million tonnes of from corn reserves last year.