December 10, 2015


China's early corn sales may prompt release of old stocks



Annual corn sales in China may happen earlier, according to a Reuters report, and this development might persuade warehouses to release inferior corn to alleviate growing stocks.


These actions could escalate a year-long trend of falling prices in an already saturated market even as the official figure on the amount of stocks to be released remains unknown. 


Industry sources believe that China Grain Reserves Corp (Sinograin) may release old stocks before April, four months earlier than usual. In addition, government sales of old stocks could be conducted at prices lower than the market value to certain companies, although there's no confirmation for the timing, volume and prices, an official source revealed.


China is not expected to avail a huge volume of state stocks until its current stockpile scheme ceases in April. On the other hand, the release of below one million tonnes of old stock are likely to be sold to ethanol and alcohol makers, the same source added.


The price may also be higher than 1,500 yuan (US$233.47) per tonne.


China is currently building up its reserves with corn acquired in the northeast, at 2,000 yuan (US$310.80) per tonne. The support price is more than 20% higher than world prices.


Corn stockpiles for the country are expected to reach 200 million tonnes by April, a volume worth one year's domestic consumption. A specific tonnage of these are auctioned off yearly when a stockpile scheme ends.


Even then, 4.06 million tonnes of the grain were sold this year.


The government is also grappling with the problem of older grains that are no longer fit for human consumption. Certain adjustments in restricted sales to designated sectors including alcohol, ethanol and feed, may be required, according to the official People's Daily.

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