July 11, 2003

Corn Prices in China Remained Relatively Stable In the Midst of Mixed Market Forces (July 11, 2003) 

 

An eFeedLink Exclusive Report

 

During the week ended July 11, corn prices remained generally firm in most parts of China as the livestock industry recovers gradually.  However, in the Northeastern corn producing areas, prices fell on account of auction sales and clearance of old grain stocks.  Recent arrival of imported corn at the ports in Guangdong province has led to an increase in stock level of corn in dock warehouses, consequently causing corn prices to dip.

 

As of July 11, changes in the prices of medium grade corn in China were as follows: 

  •             Ex-warehouse prices in Heilongjiang province remained generally firm at around RMB 960 /ton, with the exception of its western region, which registered a drop of RMB 20 /ton over last week's prices.  In Jilin province, ex-warehouse prices were at around RMB 980-990 /ton, with prices remaining unchanged in the eastern and western regions, but fell by RMB 10 /ton over last week's prices in the central region.  Ex-warehouse prices in Liaoning province stayed firm at RMB 1020 /ton, with no change over previous week's prices; 
  •            On-board prices at Dalian port also remained unchanged at RMB 1060 /ton; 
  •             Delivered-to-factory prices in Henan and Hebei provinces remained relatively stable at around RMB 1050-1060 /ton.  In Shangdong and Jiangsu provinces, delivered-to factory prices also stayed firm at around RMB 1060-1080 /ton and RMB 1120 /ton respectively, with no change over last week's prices; 
  •             Rail station prices in Central Zhejiang province and Jiangxi province remained unchanged at RMB 1100 /ton.  Rail station prices in Hunan and Hubei provinces also stayed at RMB 1140 /ton, unchanged over last week's prices.  Whereas in Central Sichuan province, rail station prices fell by RMB 10 /ton to RMB 1150 /ton; 
  •             Delivery prices in Guangdong province fell by RMB 20-30 /ton to RMB 1140-1150 /ton; but remained firm at RMB 1160 /ton in Southern part of Guangxi province and in Fujian province. 

Recently, the continuously heavy rainfall has restored the humidity level of soil in most parts of China's Northeastern region, thereby aiding corn growth in these areas.  This has helped to turn the poor state of corn cultivation in Heilongjiang province around.  An early crop of corn had made its appearance in the region South of the Huai River (Jiangsu / Anhui  provinces) recently, adding supply to the market place..

 

Unfortunately, however, recent flooding of the areas along the Huai River and other parts of China caused widespread infestation of pests and diseases, adversely affecting the growth of crops in many parts of the country.   As a result, China's summer production of crops and grains this year is expected to drop, especially corn production. 


The long speculated sale of 2 million tons of Heilongjiang-produced corn has been officially announced, to be held on July 15 2003.  It is understood that sale of the corn will be conducted in three different ways, with the bulk being designated for export.  Part of the remaining stock will be sold at specific outlets while the rest will be sold by auction, with a floor price of RMB 800 /ton. 

 

During recent months, steadily growing volume of corn export are been reported at Dalian port - with 500,000 tons in May and 750,000 in June.  According to traders, the volume of corn export is expected to hit 800,000 tons in July and that freight bookings for the coming months of August-October are already full.

 

South Korea is currently the largest corn importer from China.  Market participants hold a very positive view of the recent state visit by South Korea's President to China.  With further improvement in China-Korea bilateral trade relationship, outlook for China's corn export remains favorable.  

 

With persistent ideal weather conditions, total volume and per unit yield of US' corn production for the next season are likely to hit a new record. This is seen would exert significant pressure on CBOT's corn market. Since the second half of June, CBOT's corn price has been falling continuously, with no sign of recovery despite an oversell position being evident in the market.

 

The continuous slide in US corn prices will impact China's corn export directly, as can be seen from the recent downward adjustment in some of China's corn export prices.   


With negative market forces working in tandem - like the impending auction sale of old grain stock during the months of July and August, additional market supply of new corn, falling global prices of corn etc - tremendous pressures would be brought to bear on the direction of corn prices in China.

 

However, the destructive effects of the progressively widening floods in China, together with the gradual reduction in China's corn stockpile and increasing volume of corn export, will likely work in reverse to stem the slide in corn prices; thereby providing some balancing support to China's corn prices.

 

Overall, China's corn market is expected to remain relatively stable, with price fluctuations in different parts of China.  Short-term pressures are expected in the various corn-producing regions of China.