October 27, 2011


China's corn prices dip further, but downside limited


Corn prices in China continued to fall in the week to Wednesday (Oct 26) on the back of high arrivals of new-crop grain in the domestic market following harvest completion.


In major producing regions in the northeast, prices fell around 2% to RMB2,120-2,320 (US$332-363)/tonne.


In Shandong, a major consuming province, prices fell around 2% to RMB2,280-2,300 (US$357-360)/tonne.


Prices in Shandong have fallen around 15% from a record RMB2,700 (US$423)/tonne before the harvest.


Farmers are willing to sell new-crop corn as they think prices are satisfactory, traders said.


China's corn output this year will likely rise 4% to a record 184.5 million tonnes, the state-backed China National Grain and Oils Information Centre said.


Industry analysts said corn prices will continue to slide following the bumper harvest, but the downside will be limited as farmers may hold back stocks if prices fall too much.


Government purchases from the domestic market to replenish reserves will also underpin prices, analysts said.


Beijing may buy around five million tonnes this year from farmers to maintain the size of its strategic corn reserves at 17-18 million tonnes, or 10% of the country's annual demand, experts said.


Despite continued sales of state corn to tame inflation, the government is believed to have more than 10 million tonnes in warehouses, traders and analysts said.