April 5, 2004

China Corn Prices To Remain At High Levels
 
Prices in China's corn market are likely to remain at high levels until September due to bullish fundamentals and logistic problems, a senior corn industry official said over the weekend.
 
"The corn market is likely to stay firm in the coming months, due to an array of factors, such as transportation bottlenecks," said Jiang Jian-Hua, deputy general manager of Jilin Grain Group, one of the two state-authorized corn exporters in China.
 
Jiang was speaking at a two-day grain conference in Beijing over the weekend.
 
There is a consensus in the market that corn prices in the coming months could rise, making both farmers and grain warehouses cautious sellers, Jiang said.
 
In addition, limited railcars to transport grain and high transportation costs have added to the strength in prices in major consuming regions, he said.
 
Since late 2003, local railroad authorities in northeastern China have been giving priority to the movement of coal, rather than grain, which led to a temporary supply shortage in major consuming regions.
 
Moreover, in the past few weeks, China's northeastern provinces have been moving several million metric tons of rice to northern and southern China, at the cost of corn and soybean, to alleviate the rice shortage and ease rice prices. This too has reduced the availability of corn in major consuming regions.
 
Prior to that, in the fall of 2003, local governments in northern China enforced stricter measures to curb over-loading by truckers on public highways, which resulted in higher transportation costs, Jiang added.
 
"The freight cost from Dalian to southern China has soared since late 2003. It has a bullish impact on the corn market," he said.
 
The price of normal quality corn in Dalian, the top corn-exporting port, is forecast to move up to RMB1,350 ($1=RMB8.277) a ton by June, Jiang said. In comparison, corn in Dalian was offered around RMB1,280/ton Monday.
 
On the production front, the soil moisture level in major corn producing regions is considered good due to above-average precipitation last fall, Jiang said, adding the corn crop emergence level by late May is likely to be around average.
 
Additionally, the threat of early frost in July is slim right now, he said.