July 28, 2011

Corn prices in China rose around 1% in the week to Wednesday (Jul 27), supported by shrinking state inventories and strong demand from hog breeders and processors.

In northeastern China's provinces of Heilongjiang, Jilin and Liaoning as well as Inner Mongolia Autonomous Region, prices rose around RMB20 (US$3) to RMB2,070-2,220 (US$321-345)/tonne. 

Price in major pork production areas, including the provinces of Sichuan and Hunan, rose about 1% to a record RMB2,520 (US$391)/tonne.

The average wholesale corn price nationwide as of July 20 was RMB2,360 (US$366)/tonne, an increase of 0.9% from a week earlier, the National Development and Reform Commission (NDRC) said Tuesday (Jul 26).

Feed mills in Sichuan and Hunan have increased corn purchases recently, and market participants expect corn consumption to rise further in the second half of the year as hog production expands, the Zhengzhou Grain Wholesale Market said.

Meanwhile, corn stocks held by the government may have fallen, sparking expectations of further price rises, as traders doubt Beijing's ability to keep prices stable before the harvest, which usually starts in October.

The government offered only around 90,000 tonnes of state corn in the weekly auction Tuesday, down from last week's 150,000 tonnes - and far below weekly offers of 1.8 million tonnes at the beginning of the year.

The NDRC also said Tuesday that ex-farm hog prices in major cities as of July 20 were down 1% from a week earlier, after gaining for 12 consecutive weeks.

But the top economic planner last week warned that pork prices will drop sharply after the Chinese Lunar New Year, which falls at end-January, due to overstocking of piglet inventories and a lack of consolidation in China's sprawling pork industry.