China sold more than 80 percent of its corn from state reserves available at an auction on Friday, higher than market expectations, reflecting strong demand from feed producers and grain traders.
China sold 1.82 million tonnes of corn harvested in 2013, or 90.81 percent of the grain offered for that year. There was 370,000 tonnes sold from 2012, or 73.76 percent of the total offered.
"Sales were quite hot, exceeding market expectation," said Meng Jinhui, analyst at Shengda Futures. "That suggested that traders were bullish about corn prices going forward and feed producers in the south had lower stocks of grains than we thought."
Supported by high interest, corn from 2012 sold at an average price of 1,425 yuan ($206.53) per tonne while 2013 supply sold for an average of 1,379 yuan. Both levels were at premium to the auction starting prices and higher than market expectations.
Earlier, market participants speculated that the starting prices would be lower, as low as 1,100 yuan per tonne for 2012 corn, pushing down Chinese futures.
But, prices are expected to fall, together with market interest, as more supplies fill the shortage in the market gradually, said analysts.
"The rise of corn prices will be curbed in the short term," said Cherry Zhang, an analyst at Shanghai JC Intelligence Co, Ltd. Beijing released more than 2.5 million tonnes of corn from its state reserves on Friday and plans to sell another 859,500 tonnes of 2014 corn from 11 warehouses across the nation next Tuesday. That will further pressure corn prices.
However, corn prices in the coming months will edge up, as demand from feed producers remain strong. Also the government is expected to set the base prices at a level that would not pressure the market, analysts said, citing a document the nation's state planner issued in March.
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