China sells most corn on offer on shortage concern

Updated: 2010-05-05 17:32
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China, the world's second-biggest corn consumer, sold most of the grain on offer in a series of auctions around the nation yesterday, indicating increasing concern that there may be a shortage.

The State reserves sold 1.22 million tons, about 88 percent of the 1.39 million tons offered, according to data on the website of the National Grain & Oil Trade Center late Tuesday. Auctions in top producing regions sold all the supply offered, as in the previous three sales, the data showed.

China in recent years has bought corn in producing areas and sold the stockpiles during the year to control prices. The fourth series of auctions held this year attracted significant interest on speculation output last year was less than officially reported because of a drought.

"The government only has about 13 million tons of corn on hand, so they probably can't keep selling at this rapid pace beyond June," said Yu Xiaomeng, analyst at researcher Shennong Net in Beijing. "We expect shortages will occur" and prices increase because of either a transport bottleneck or lower output, Yu said.

Auctions in Heilongjiang and Jilin, the top two producers, sold 801,000 tons. The amount offered was 11,800 tons more than last week and average prices were 3 yuan a ton higher, the China National Grain & Oils Information Center commented in an e-mailed report on Wednesday.

Demand indications

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The price increase may not be a clear indication of the supply situation because the qualities sold varied, Yu said. In reality, the government has taken other measures to curtail speculation and hoarding, such as restricting buyers' funding and administrative curbs, she said.

Corn for September delivery on the Dalian Commodity Exchange rose 5 yuan, or 0.3 percent, from the previous settlement price to 1,925 yuan ($282) a ton. The most active futures have gained 11 percent in the past six months on growing concern about supply shortages.

Separately, under an inter-province stockpile rotation scheme, 586,500 tons were offered in 10 other provinces, including Guangdong and Shandong, the top two consuming regions, according to the National Grain & Oil Trade Center. Shandong sold 96 percent of the 218,500 tons tendered, while Guangdong and Shanghai sold the entire amount, the center said.