November 20, 2008

China corn prices little changed; state reserve buying eyed


Corn prices in major production regions in China were little changed in the week to Wednesday (November 19) in thin trade, as farmers were reluctant to sell ahead of buying by state reserve warehouses, which is set to begin in earnest in about a week, said traders and analysts.

In Heilongjiang province, a major production base in the northeast, corn prices were around RMB1,480 a tonne, almost the same as a week earlier.


Prices in Jilin province, another producing region in the northeast, were quoted around RMB1,500/tonne, unchanged from a week ago.


Farmers are waiting for state reserve warehouses to make purchases, and if they want to sell aggressively now, they will probably get a price lower than the government-set price, said a trader in Jilin province.


The government said in late October it will buy corn from the northeast production regions at RMB1,500/tonne to support prices and protect farmers' incomes.


Traders said as it took some time for the state reserve warehouses to receive bank loans to buy corn from farmers, such buying has just started in some places and is expected to be in full swing in a week or so.


"Spot market trade was very thin. Trading firms simply chose to stand on the sidelines, waiting to see what will happen after the state reserve purchases begin," he said.


"As the state buying is to begin, prices should have limited downside and be able to stabilize at the current level for the time being," said an analyst in Beijing.


However, with the country's corn production this year expected to rise by 2.4 percent and with exports sharply lower so far this year compared with last year, traders said the outlook is still gloomy, especially after many small feedmeal producers in the south shut down due to financial difficulties.


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