September 1, 2011

Tight supply ahead of harvest pushed China's corn prices to a fresh record in the week to Wednesday (Aug 31), but prices are losing momentum with new crop expected to enter the market around October.

In northeastern China, the major producing area, purchase prices rose around 1% from a week earlier to as high as RMB2,280 (US$357)/tonne, while in southwestern China's Sichuan, China's top hog-raising province, corn also rose about 1%, to RMB2,580 (US$404)/tonne - the highest price nationwide.

Arrivals of the new crop will certainly lead to a price correction, pressured by an outlook for a bumper harvest, the Zhengzhou Grain Wholesale Market said in a research note.

China's corn output this year will likely increase 3% from last year to 182.5 million tonnes, the state-backed China National Grain and Oils Information Centre said earlier.

Before the harvest, the government will likely release some imported corn from state reserves to increase market supply, lowering expectations of any further price increase, it said.

"Current market prices don't reflect the real demand situation, speculation has contributed to the recent corn price surge," analysts said, adding that fundamentals alone were not sufficient to drive prices to new records given that prices for starch and alcohol remain weak, although demand from feedmills is strong.

The nation's average corn prices have risen 14% in the year to date, to around RMB2,420 (US$379)/tonne, data from the National Development and Reform Commission, the nation's top economic planner, showed. Prices in some major consumption provinces have risen more than 20%.