November 21, 2008


China may buy more corn; up reserves by 1.5 million to 5 million tonnes



The government may increase the corn stockpile in its state reserves by buying an additional volume of up to 5 million tonnes to support domestic prices, analysts said Friday (November 21).


They said market expectations of the latest round of government intervention are keeping corn futures prices somewhat stable on the Dalian Commodity Exchange (DCE) even as other commodities plummet.


In contrast to most other agricultural futures traded on the DCE, corn has made small but steady gains for most of this week, settling 1 percent up Thursday from a week ago.


In late October, the National Development and Reform Commission said the government planned to buy corn at RMB1,500/tonne, apart from increasing its stockpiles of soy.


The commission, China's top economic planner, didn't specify the volume at the time, but Li Dongji of Guotai Jun's Futures, among other analysts, said the government's decision in late October was to buy 5 million tonnes of corn.


Now, traders and analysts speculate the government could significantly raise its stockpile of corn and soy, with estimates for additional corn purchases in the range of 1.5 million-5 million tonnes.


They added the additional corn will likely be bought from the northeast major corn-producing regions, such as Heilongjiang province, at RMB1,500/tonne. Domestic corn cash prices in Heilongjiang were RMB1,380/tonne Friday.


Analysts said the state purchase of 10 million tonnes of corn will help support the domestic market, but a trader at a big feedmeal company said corn consumption will likely remain weak next year.


Benchmark May 2009 corn futures traded on the DCE closed the morning session largely flat at RMB1,594/tonne, while the benchmark soy, soy products and edible oil futures tumbled between 3 percent and the 5 percent lower limit.
US$1=RMB6.826 (Nov 25)

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