April 13, 2011

China resumes feed wheat sales; lowers corn auction offer

The central government sold 131,720 tonnes of state reserves of low quality wheat for animal feed production to ease tight corn supplies, while reducing the volume of corn offered at weekly auctions by as much as 64%.

The feed wheat, from a total of 306,098 tonnes offered on Tuesday (Apr 12), was sold at an average of RMB1,823/tonne, 2% higher than last week's price, reflecting interest from feed mills.

Before the sale, analysts said the government might hold about 1.64 million tonnes of feed-grade wheat. The wheat was harvested in 2009, but heavy rains during harvest had reduced the quality.

On Tuesday, the government sold only 82,620 tonnes of corn, out of 610,977 tonnes on offer. The weekly offered volume has been cut from as high as 1.7 million tonnes at previous auctions.

Record Chicago Board of Trade (CBOT) corn prices were too high for China to source more from overseas to refill dwindling state reserves, from which the government has sold 53.6 million tonnes of corn since 2008.

Sinograin, which manages state grains reserves, recently raised purchase prices to try to buy more from farmers after earlier purchases failed to source enough, traders said.