December 2, 2010

 

Government measures cool China's corn prices

 
 

Corn prices in major producing areas of China were largely stable in the week to Wednesday (Dec 1), with some areas seeing slight declines in prices, as government measures to fight inflation appeared to temporarily offset expectations that buying to rebuild inventories will begin soon.

 

Prices in Siping, Jilin province, were around RMB1,890 (US$284) a tonne, mostly unchanged from a week earlier.

 

Prices in Anyang, Henan province, were between RMB1,920-1,940 (US$288-$291)/tonne, down about RMB20 (US$3).

 

China needs to replenish its national corn reserves after a series of auctions to stabilise prices, but farmers are reluctant to sell as they still expect prices to rise again, analysts said.

 

Tough measures by the government to fight inflation have damped the rebound in sentiment associated with the need to rebuild inventories, and farmers will have to accelerate selling before the Chinese New Year, a peak consumption season, as they need more cash.

 

However, spot corn prices are still expected to rise because this year's corn production is likely to be around the same as last year's, while both government and enterprise inventories are low and demand from feed mills is increasing, experts said.

 

"China's corn supply is in a tight balance," said analysts, indicating that even a gentle decline in production or increase in demand could trigger wide price fluctuations.

 

China started corn imports this year to help curb domestic price increases, as imported corn is a little cheaper.

 

Benchmark corn for September delivery traded on the Dalian Commodities Exchange settled at RMB2,271 (US$341)/tonne Tuesday, down 5.8% from a record RMB2,411 (US$362) settlement price on November 10.

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