September 29, 2003
China Corn Market Outlook
Corn prices in the major corn producing and consuming regions of China have mostly sagged in recent days, as the looming harvest dragged down by the looming harvest puts pressure on prices, local traders and analysts in China said. But a potentially smaller corn crop this year and higher domestic demand will limit the price slide, traders said.
The prices of locally produced corn in central-northern Shandong and Henan provinces, the major corn producing regions, were quoted around 1,060 yuan ($1=CNY8.28) to CNY1,100 a metric ton, compared with CNY1,100-CNY1,180/ton about ten days ago, traders said. The early harvested corn in these provinces hit the market in small parcels recently.
Most of Chinas corn crop is planted from late April to June and harvested in September and October in the Northern China Plain and northeastern China. China's corn production is forecast around 116 million tons in the October 2003 to September 2004 marketing year, compared with 121.3 million tons in the previous year, traders said, citing the estimate from a government-backed information center.
The prospect of a lower corn crop and strong seasonal demand from the local livestock and feedstuff industries fuelled a pre-harvest rally, which has lost steam in the past week. The increased supply of new crop corn has eased concerns over tighter supplies. Corn prices in other major corn consuming regions in eastern China have also turned soft in the past week as market participants prepare for the arrival of new crop corn.
In Eastern Chinas Jiangsu province, the prices of corn lost CNY40-CNY60 in the past week.
"The weather in the northern China Plain and Yellow River basin has turned drier recently, which is favorable for the ongoing corn harvest, and the procurement prices of corn has fallen as a result," a trader from a grain trading company in Henan province said.
The corn markets in northeastern China remained relatively steady in the past week, as markets are preoccupied with the soybean harvest, while the corn harvest will begin on a large scale in later weeks.
Smaller Crop and High Demand To Cap Downside Risk
But most traders and analysts said the downside to corn prices will be limited by the lower crop production this fall. Robust demand from the recovering local feedstuff industry will also minimize the downside risk, said traders.
Corn output in northeastern China will be lower by more than 10% this year compared to last year, with output in Liaoning close to 8 million tons, and output in Heilongjiang close to 9 million tons, an official from a local trading house in Heilongjiang said.
In Jilin, the top corn producing province in China, also in the northeast, corn production in 2003-04 is forecast around 13.8 to 14 million tons, about 18% lower than the production in 2002-03, largely due to less-than-favorable growing conditions and a lower planting acreage, traders said.
Logistical woes in northeastern China during the winter holiday season would also translate into less grain movement to other provinces. Chinas traditional Spring Festival will start Jan. 21, 2004.
