July 6, 2011

 

China's feed corn demand strong on record hog profitability 
 

 

China sold 120,440 tonnes of corn or 45% of the volume it offered from state reserves in an auction Tuesday (Jul 5), while an indicator of profitability for hog farmers rose to a record level, government agencies said.

 

The ratio of sales to offer volumes was the highest this year, indicating strong demand for below-market-price state corn reserves as breeders expand hog production amid record high pork prices.

 

China offered 266,028 tonnes of corn in the Wednesday auction, the National Grain and Oil Trade Centre said, down sharply from around 420,000 tonnes a week earlier. It was offering around 1.8 million tonnes each week early this year, but reduced offer volumes to about 600,000 tonnes per week from April due to dwindling stocks.

 

Strong demand from processors and feed mills has driven corn prices 20% higher so far this year, and the government's weekly sales have done little to cap the price gains, as only some feed mills and animal breeders are qualified to participate.

 

The ratio of sale prices for hogs to corn prices, an indicator of profitability for pig farmers, was at 8.47 as of June 29, the National Development and Reform Commission said separately Tuesday, the highest level since the country's top economic planner began publishing the indicator in May 2009.

 

The hog-to-corn-price ratio was 4.8 last June, when hog farmers suffering deep losses. A ratio of 6 is roughly a break-even level for hog farmers.

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