December 24, 2008

China corn prices inch lower on cheaper imports


Corn prices in China's largest producing areas drifted lower in the week to Wednesday as cheaper imports continued to pressure domestic prices.


In the Harbin area in Heilongjiang province, a major production base in the northeast, prices were around RMB1,320 per tonne, down RMB40 from RMB1,360/tonne a week earlier.


Prices in Changchun, in Jilin province, another producing region in the northeast, were also down RMB40 at RMB1,350/tonne from RMB1,390/tonne a week ago.


"Corn prices are going to keep feeling the pressure from cheaper imports," said Wang Cheng of Nanhua Futures in Hangzhou.


Imports now cost some RMB1,300/tonne, Wang said.


The pressure on local farming interests is prompting the government to press forward with plans to stockpile 30 million tonnes of corn.


The government would buy 4.5 million tonnes of corn by April from Heilongjiang, part of the 14 million tonnes of corn, rice and soy to be bought from farmers in the province, Xinhua news agency reported.


The government has said it would stockpile corn at RMB1,500/tonne to support prices.


But market skepticism persists on whether the stockpiles would be effective.


"Twenty million tonnes of stockpiles will take some time to accumulate, and the grain warehouses might run out of space quickly," Wang said. "You can't stockpile it all at once. You still have to sell some out before you can then take in new stock."


Wang forecast more downside for corn prices as higher demand for grains in the holiday season sparks more selling interest.


But global demand remains weak. China's corn exports fell 81 percent on-year in November, and worries remain that rising corn production clouds the crop's outlook.


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