China's Sinograin sells from corn stockpiles, gaining from recent price rises
[BEIJING] China's state grains stockpiler Sinograin sold corn from its stockpiles at prices in line with the recent market gains amid concerns of falling supply during the next year because of cuts in plantings even as demand remains strong.
Sinograin sold 26,719 tonnes of corn at an average price of 1,870 yuan (US $287.71) per tonne on Tuesday, the company said in a statement.
The auction sold all of the grain on offer and the corn consisted of mainly first-grade corn, according to the statement. The corn was harvested in 2014, Sinograin said in a separate statement on its website. China rates corn quality according to five tiers.
Sinograin realized higher prices for the corn because the "quality of the grain is good," said Meng Jinhui, an analyst with Shengda Futures, via WeChat. " It also reflected heat in the market." Chinese corn futures had surged 12 per cent from the end of October to last Friday when prices climbed to the highest in nearly two years.
However, China's corn futures prices fell 0.8 per cent to 1,824 yuan per tonne on Tuesday.
"Futures prices fell a little but demand remains quite strong in the physical market due to corn deficit in the 2017/18 year and sharp increase in both feed and industrial demand," said Shengda's Mr Meng.
Prices also climbed on signs that corn farmers are holding onto their corn in expectation of higher prices after China's government ended its stockpiling program and the farmers reduced the acreage devoted to corn, adding to the tightness in the corn supply.
"Farmers in main production areas are holding onto their corn while traders build up stocks betting on higher prices, as the market believes the corn acreage cut was even larger than expected," said a grains trader with over 20 years of experience.
The higher demand and less supply is expected to result in a deficit in corn supplies at the end of the 2017/18 crop year, which ends in September, of 4.57 million tonnes, the country's agriculture ministry said last month.
The supply and demand imbalance is likely to last at least until after the Lunar New Year holiday, which starts on Feb. 15 this year, if there is no large volume released by the state, said traders and analysts.
"Only if the state increases supplies in large volume, can the physical market really cool down," said Shengda's Mr Meng.
REUTERS
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