September 29, 2011


Good harvest outlook, state releases soften China's corn market


Corn prices in China fell in the week to Wednesday (Sep 28), as new-crop output and a planned release from government corn reserves eased a tight supply outlook.


In Shandong province, where the corn processing industry and feed mills have heavy presences, corn prices fell 3% from a week earlier to around RMB2,620 (US$409)/tonne.


In northeastern areas, prices were at RMB2,220-2,380 (US$347-372)/tonne, almost unchanged from a week earlier.


The government will release about 3.7 million tonnes of corn from central government reserves before the end of November to meet market demand, the State Administration of Grain said last week.


The planned release, in combination with recent sharp decline in US corn futures prices and the ongoing harvest, weighed on domestic prices, with many traders accelerating the pace of old-crop sales.


China likely has not placed new orders for US corn despite a fall of more than 15% in Chicago Board Of Trade prices in the last three weeks, as domestic output is expected to hit a record this year, and some traders have turned bearish on the price outlook.


China's corn prices have risen more than 25% over the last 12 months, while wheat prices have increased less than 4% and soy prices have been almost unchanged.


Traders expect China's corn prices to continue rise as the corn shortfall is widening despite the forecast increase in output this year.


By 2015, China will likely face a corn shortfall of around 15 million tonnes, since demand is growing faster than domestic output, China Feed Industry Association Executive Deputy President Li Xirong said last week.

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