June 30, 2011


China's corn prices up amid inventory drawdown


Corn prices in China's major producing areas rose in the week to Wednesday (Jun 29), as farmers almost sold out their inventories, prompting traders and feedmills to bid higher to replenish stockpiles before October harvesting of new-crop corn.


Prices in Heilongjiang, the nation's top corn-growing province, rose about RMB10 (US$1.55) from a week earlier to RMB2,060-2,180 (US$318-337)/tonne, while prices in the eastern province of Shandong, where feed mills and processors have a heavy presence, rose about RMB30 (US$4.64)/tonne to RMB2,280-2,430 (US$353-376)/tonne.


Corn prices in China, the world's second-largest consumer, have risen around 20% this year.


Policy tightening by Beijing and tough measures to limit corn processing expansion have led some traders to cut their high inventories to repay bank loans, weakening price momentum, said China Corn Network, a consultancy that tracks the cash market.


"We expect the upside in corn prices to be limited," analysts said. "We don't rule out the possibility that corn prices will decline with limited downside."


Still, with a recent slump in global oil prices, corn prices across the world are stabilising or declining, experts said, adding that China's corn prices overall track global prices, especially Chicago Board of Trade corn futures.


Still, China's relatively isolated cash corn market is not easily affected by external markets, as it is closely controlled by the government. Beijing is selling state reserves each week to increase market supply and keep prices in check.


Corn futures on the Dalian Commodity Exchange were at a five-month low. Benchmark January corn settled at RMB2,317 (US$358)/tonne, down 8% from a record high in February.

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