Since May 2016, China has canceled the purchase policy of corn for temporary storage and stopped the purchase of 2015/16 corn. This year the corn purchase volume has hit the high record of 125 million tonnes. Most of domestic high-quality corn has been purchased by the state, leading to the consequent gradual consumption of the extras in the market.

Source: Internet

Due to the tight supply in the market, the domestic market price of corn rebounded and, according to CCM's price monitoring, the price hit a low record on 13 April of USD271.82/t (RMB1,791/t) and then rebounded to USD278.50/t (RMB1,835/t) on 7 June. Meanwhile, some downstream enterprises raise the purchase price for more corn as a response to the tight supply.

On 7 June, downstream enterprises in Shandong Province raised the purchase price of corn (second grade) to USD254.97/t-USD273.19/t (RMB1,680/t-RMB1,800/t), an average of USD20.79/t (RMB137/t) higher than that in May.

Monthly market price of corn in China, 2014-2016

Source: CCM

Overstored corn auctions

As the corn surplus remains tight, China officially initiated the directional selling of overstored corn on 13 May, 2016 with three auctions conducted so far:

• 3 June: transaction volume at 1.75 million tonnes, transaction rate at 59.8%, average transaction price at USD238.73/t (RMB1,573/t)

• 27 May: transaction volume at 864,960 tonnes, transaction rate at 44%, average transaction price at USD233.27/t (RMB1,537/t)

• 13 May: transaction volume at 30,200 tonnes, transaction rate at 7.6%, average transaction price at USD200.64/t (RMB1,322/t)

The overstored corn auctioned during these dates has been harvested in 2012 and auctions were held by the State Administration of Grain (SAG) at national grain trading centers in all provinces (autonomous regions and municipalities).

Since the overstored corn is of poor quality, the transaction rate was generally lower than 60%, in spite of this, it is gradually becoming popular as it is harder and harder for enterprises to purchase corn in the market. Therefore on 3 June, the SAG announced its plan to increase another 1 million tonnes of corn for auction (2.42 million tonnes before), totaling 3.42 million tonnes.

Auctions for alternative corn

Since 6 May, 2016, Jilin Province has started to hold provincial auctions for alternative corn (each year, the stored grain should be alternated, especially in the harvesting season, to ensure the quality), totaling an amount of 288,400 tonnes of corn that was sold with an average transaction price of USD246.02/t-USD258.31/t (RMB1,621/t-RMB1,702/t).

Most of the alternative corn has been harvested in 2012 and 2013, at second grade and the transaction rate increased to 93.2% from 8.3%.

Details of auctions of alternative corn in Jilin Province, 6 May-8 June, 2016

Source: Jilin Grain Wholesale Trade Center Co., Ltd.

At the moment, the market supply of corn remains tight and the market price is gradually climbing up. Both the market and enterprises are waiting for the high-quality corn harvested in 2014 and 2015 to be put into the market.

Until the corn stockpile is released by the Chinese government into the market, enterprises will keep increasing their purchase price and thanks to this, the domestic market price will be boosted. CCM predicts, however, that as soon as the inventories flow into the market, the market price of corn will fall back without policy guidance.

This article comes from Corn Products China News 1606, CCM

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

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