May 11, 2004

 

 

China Corn Markets Narrowly Mixed; Eye Improvement In Coming Weeks

 

China corn markets were narrowly mixed in the past week in thin trade, as market participants returned from the weeklong May Labor holiday and scrambled for clues about the market direction, traders and analysts said Monday.

 

The corn markets in northeastern China, the major producing region, were mostly unchanged or up from the level of late April, traders said.

 

"The farmers in northeastern China are now focusing on the spring planting, and there was virtually no corn offered for sale in the past holiday week," a trader from a local grain trading company in Harbin, Heilongjiang, in northeastern China, said Monday.

 

Corn producers in northeastern China are not eager to sell their old grain stocks for cash, because farmers are in a relatively better economic situation after local government allocated funds to them in the form of direct subsidy or seed subsidy, in response to the call of Beijing to boost farmer's income and encourage grain plantings.

 

"We got about 150 yuan ($1=CNY8.277) from local government for planting one hectare of grain such as rice," a farmer in Jilin province said on Monday. He wouldn't mind waiting for another one or even two months to see if corn prices could get higher, the farmer said.

 

The grain trading volume during the holiday was minimal in many other producing regions, largely due to reserved selling from farmers, shrinking supply of old-crop corn, as well as tighter fund from grain procurement companies.

 

In northern China, the corn prices were mostly unchanged from the pre-holiday level, as there was little fresh news to jostle the markets, traders said.

 

In Dalian port, the top corn exporting port in China, the prices of normal quality corn were quoted around CNY1,290-1,300 a metric ton, basically the same as before the weeklong holiday.

 

There is some selling pressure at southern ports, because higher temperatures in the past week induced selling of corn with high moisture content, another trader in Beijing from China National Cereals Oils and Foodstuff Import & Export Corp, or Cofco, said.

 

The concerns about credit tightening also could have led to a round of selling of corn stocks, especially those companies who bought corn on loans and couldn't hold the grain for longer time.

 

But later this month or next month, local corn markets are likely to move out of the current doldrums and show more strength, analysts in China said.

 

"While the recovery of demand from livestock and feedstuff industry seems to be lagging behind the previous expectation, the overall trend for feed demand is intact and will get better in the coming month," said a market analyst from a local brokerage house in Dalian.