On Nov. 15, 2012, State Administration of Grain issued Notice on 2012 Corn Purchase for National Temporary Reserve (the Notice), which meant the government had launched 2012 corn temporary reserve, according to CCM’s December issue of Corn Products China News.
The main content of the Notice is stated as below:
China Grain Reserves Corporation (China Grain Reserves), the temporary purchaser, will purchase corn with no limited volume in Inner Mongolia, Liaoning, Jilin and Heilongjiang from Nov. 15, 2012 to April 30, 2013.
The temporary purchase prices of standard corn, third-grade corn containing 14% moisture, in Inner Mongolia, Liaoning, Jilin and Heilongjiang are USD342/t (RMB2,140/t), USD342/t (RMB2,140/t), USD339/t (RMB2,120/t) and USD336/t (RMB2,100/t) respectively. Besides, the temporary purchase prices of second-grade and first-grade corn are USD6.4/t (RMB40/t) and USD12.8/t (RMB80/t) higher than third-grade corn respectively in each region.
The deduction rate of price against moisture content (deduction rate) is 1.65:1, meaning that the temporary purchase price will decrease by 1.65% unit–USD5.28/t (RMB33/t) when the moisture content increases by per 1%.
Although the 2012 corn temporary purchase price is USD22/t (RMB140/t) higher than that in 2011, the higher deduction rate has disappointed domestic farmers. The deduction rate increased to 1.65% from 1.5% before 2012, leading to lower temporary purchase price of moist corn. Considering new moist corn containing about 30% moisture in Northeast China, the temporary purchase price of moist corn is about USD7/t lower than expected.
Besides, since the market price of corn was high in Nov. 2012, the corn temporary purchase price seems to be relatively lower and China Grain Reserves actually has purchased little corn. In Nov. 2012, only the temporary purchase price of corn in Heilongjiang was higher than the lowest market price, making temporary purchase available in Heilongjiang. But Heilongjiang suffered snow in Nov., which made temporary purchase quite hard. After the snow in Dec. 2012, many corn deep-processing enterprises raised their purchase price of corn to increase their purchase volume. For example, Zhaodong COFCO Bio-energy and Bio-chemical Co., Ltd. raised its purchase price of corn from USD336/t to USD339/t on Dec. 11. The growing market price of corn made the temporary purchase more difficult.
Generally, the temporary purchase volume of corn depends on the market price and temporary purchase price. On one hand, as usual, the market price of corn is likely to see uptrend before Spring Festival in Feb. 2013 thanks to increasing demand and declines in April when farmers sell corn to get cash for spring ploughing, increasing the supply of corn. So April is the best time to increase the temporary purchase volume of corn. But, China got a good harvest of corn and allowed Argentina and Ukraine to export corn to China in 2012. The increasing supply of domestic corn and the low import price of corn from these countries may decrease the market price of corn in 2013, increasing the difficulty in temporary purchase of corn.
On the other hand, China Grain Reserves still owns priority to determine the temporary purchase volume of corn. It can get USD14.7 (RMB92) storage charge per tonne of corn. If it makes concession and purchases corn at a premium price, the temporary purchase price will become competitive, increasing the temporary purchase volume.
Source: Corn Product China News 1212
http://www.cnchemicals.com/Newsletter/NewsletterDetail_6.html
Main content of Corn Product China News 1212:
2012 annual review of China's corn products industry
Domestic supply of furfural declines from Sept. to Nov. 2012
Analysis of China's corn products Imp. & Exp. in Oct. 2012
Market price of MSG stops downtrend in Dec. 2012
Domestic market price of corn starch turns downtrend to slight uptrend in Dec. 2012
Baolingbao shows application solutions for its functional sugars
VC and VB2 in China perform badly in 2012
Corn-based ethanol in China performs poorly in 2012
Changshouhua Food makes new progress in corn oil
Three research projects of Longlive Bio-technology pass assessment
Chinese government launches 2012 temporary reserve of corn
Substitution of wheat for corn declines in Q4 over Q3 2012
… …
Corn Products China News, a monthly publication issued by CCM on 20th of every month, reveals the driving force of news stories and deeply analyzes the influence of trends and dynamics on domestic and international corn deep processing industry.
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