Weak China Corn Market Could Get a Jolt from Mold Problem

China's corn prices have been under downward pressure, but there are early signs of a turnaround in the market due to quality problems in the northern plain region. 

On October 14, the Dalian futures price closed at RMB 2093 per metric ton, down 5.5% from its September 8 peak.

China Dalian Commodity Exchange.

 A Feed Industry Information Net report today reported the national average cash price for corn was RMB 2,201.70, down 4.19% from a week earlier. The increased volume of new corn coming on the market is driving down prices, the report said. The agriculture ministry estimates that the corn harvest is more than 50% complete. Corn output estimated to be up this year due to a slight increase in area and yield improvements achieved by a nationwide campaign to raise grain yields that was declared by the communist party's "Document No. 1." Buying is cautious despite a stubbornly high swine inventory and August feed output of 20.36 million metric tons that was up 3.7% from the previous year. 

A separate analysis posted on several sites Monday predicted that China's corn prices could soon turn upward in the northeastern region. The analysis noted that northeastern farmers will soon cut back their sales of corn as falling prices are now approaching the production cost. When profits disappear they will be less eager to sell. Second, the analyst observed that companies are converging on the northeast to buy corn because corn quality has been degraded in Shandong Province and other parts of the northern plan corn belt where heavy rains have been falling since mid-September. As competition for good quality corn in the northeast region heats up, the price will rise. According to the analyst, businesses in the northeastern region are beginning to feel a sense of crisis and will have to raise prices in order to buy enough corn for their needs.

The Feed Industry Information Net analysis also cited heightened risk of mold in north China as drying capacity is insufficient, and piles of newly harvested corn are getting wet. That analysis predicted that a monthly decline in corn prices during October is likely but advised readers to pay close attention to weather conditions during the harvest period.