August 20, 2008

China corn prices lower on weak consumption, government sales


China's corn prices were lower in the week to Wednesday (August 20, 2008) due to weak demand and the government's continuous sales.


Corn prices in the Yushu area of Jilin, a major producing province, were around RMB1,590 a tonne, down from RMB1,610 a week before.


Corn prices in Qingdao in Shandong province were at RMB1,750/tonne, compared with RMB1,760/tonne last week.


Farmers' corn stocks are low, and traders are holding most of the stocks.


A surge in feedmeal prices has eaten into the profits of the livestock and poultry industry, forcing them to curb purchases, said Lv Yang, a trader at Jilin Grains Centre.


Corn prices in Chengdu city in Sichuan province, a big feedmeal consumption area, were at RMB1,820/tonne, down RMB10/tonne.


Environmental protection measures needed during the Olympics to reduce pollution also forced many corn processing plants near Beijing to cut or stop production.


Meanwhile, the government's continuous auctions of corn have put psychological pressure on the market, said analysts.


The government sold 122,150 tonnes of corn from its reserves on Tuesday, or 35 percent of the 352,155 tonnes it planned to sell.


The corn was sold at an average price of RMB1,552/tonne, up from RMB1,543/tonne a week ago.


China's State Administration of Grain has ordered the allocation of 519,500 tonnes of corn from the producing areas of the northeast to the southern region to further tame prices.


The allocation of the corn, despite weakening prices, shows the government's resolve to further control grain prices in order to curb inflation, said a local analyst in Dalian.


Analysts expected corn prices to remain weak ahead of the harvest in September, amid expectations for a good harvest this year.


Weather in major corn producing areas of the northeast has been good so far this year and the growth of the corn is better than it was last year.

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