November 10, 2011


Bumper crop, hog price decline soften China's corn market


Corn prices in China continued to fall in the week to Wednesday (Nov 9) on the back of a bumper harvest and traders' concerns that demand will weaken due to falling hog prices.


In major producing regions in the northeast, prices fell around 1% to RMB2,070-2,240 (US$326-352)/tonne.


This reflects declining hog prices. In the top two hog-raising provinces of Sichuan and Hunan, prices also fell about 1%, to RMB2,480-2,530 (US$390-398)/tonne.


China's wholesale pork prices declined for a seventh consecutive week last week to RMB24.75 (US$3.90) per kilogramme, down 6.4% from a record reached in mid-September, data from the Ministry of Commerce showed.


Meanwhile, returns from hog production, measured by the hog-to-corn price ratio, also fell for a seventh consecutive week, to 7.35 as of November 2, according to the National Development and Reform Commission. A ratio of 6 is roughly a break-even level for pig farmers.


The average corn price in China as of Tuesday was RMB2,414 (US$380)/tonne, down 2% from a week earlier, analysts said.


More farmers will start to sell their corn soon, since the harvest has been completed, suggesting further risk to the downside, traders said.


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


In the long term, robust demand will continue to drive up prices in 2012, traders said, referring to the continuing expansion of industrial corn consumption and expected higher demand from feed mills when pork consumption peaks in the winter.


"In 2012, corn prices are unlikely to go back to the record level reached in September," a Shandong-based corn trader said.


Corn in major producing areas, where prices are the lowest in China, is expected to find support around RMB2,100 (US$330)/tonne, analysts said, citing market talk that China's state stockpiler will buy at this level to replenish depleted state reserves.

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