December 2, 2011
China's government has decided not to stockpile a large volume of corn from the domestic market for fear it could push up prices at home, which are now under pressure from a record harvest, industry sources said Thursday (Dec 1).
Weakening domestic prices may also briefly halt overseas purchases of corn even as the Chicago Board of Trade (CBOT) prices fell below US$6 per bushel last week, low enough to attract China to shop to refill its depleted state reserves.
"The authorities have decided not to launch a large-scale stockpiling programme this year as they did in 2008," said one industry source.
The government sees current domestic corn prices as still high and there is no need for it to aid prices as it did for soy, analysts said.
Large scale stockpiling of corn by the government had been expected by the market earlier because Beijing needs to refill its reserves after it sold more than 50 million tonnes of the grain, a majority of which was stockpiled in 2008.
Physical prices in the top corn area of Jilin have fallen 8% over the past seven weeks. Dalian futures prices have fallen by the same amount, although the most-active May contract settled 0.9% higher on Thursday after China's central bank decided to cut banks' reserve requirements to ease credit controls for the first time in three years.
Industry participants said the reserve requirement ratio cut may help boost market sentiment but will have little impact in pushing up corn prices in the near term.
"The one-time cut has little impact, unless such a move will be continued," analysts said.
China's corn output is estimated at a record 184.5 million tonnes in 2011, up 4% on-year, according to the China National Grain and Oils Information Centre.
Traders said China is not in a rush to book more imports after it purchased more than three million tonnes from the US to refill state reserves this year.
"We have a bumper harvest this year, and so still half of the imports (booked this year) will arrive in the first half of next year. More imports will depend on the demand and supply situation," said a trading executive with a state-owned trading house.
Meanwhile, China's rising pork imports would also help ease corn demand, analysts said.
China imported 303,000 tonnes of pork and pork products in the first 10 months of this year, a jump of 104% on-year, customs data showed.