China will start selling old corn stocks from state reserves this week, pressuring prices in the world's second-biggest consumer of the grain and offering some respite to livestock farmers from rising costs, said traders and analysts. The first sales of 2018 will take place on April 12 and 13, the National Grain Trade Center said in a notice last week, offering almost 7 million tonnes largely from the 2014 crop.
The floor price for most of the corn is set at 1,350 yuan ($214.40) per tonne, slightly higher than last year, but significantly lower than current physical prices, said the analysts and traders. Beijing is trying to get rid of huge stocks of ageing corn that were amassed during a multi-year state stockpiling programme. Last year it sold around 50 million tonnes, but it still has an estimated 179 million tonnes in warehouses.
This year it brought the sales forward by a month in a bid to help tame high corn prices, said Fan Jingya, grains analyst at Cofco Futures. Corn has dropped nearly 1 percent this year, checked by rumours of the state release, after gaining nearly 14 percent on the Dalian Commodities Exchange the past two years. The corn futures moved little on confirmation of the sales.
Physical prices are set to fall, however, said Meng Jinhui, a corn analyst at Shengda Futures. "Prices are at 1,850 yuan per tonne at northern ports, and I think they will soon drop to between 1,700 yuan and 1,750 yuan," he said. That could benefit feedmakers and pig farms who currently face a surge in prices of key proteins for animals. Soyameal futures hit a record high on Monday on news of a potential hike in the cost of soyabeans due to Beijing's proposed import tariffs on US supplies.
Some are expected to switch to using more corn and corn products like distillers' grains to replace some of the soyameal in feed rations. Most demand at the sales is expected to come from industrial processors such as producers of ethanol that have lower quality requirements and can still use the four-year-old grain, however. Potential buyers who surveyed the first batches to go on offer this week reported poor quality, Meng said.
But Beijing may decide to offer better quality corn in coming weeks, benefiting other users as well. "There's so much, it's not possible that all of it is bad quality," said a Beijing-based grains trader who declined to be identified. European traders said interest in corn from Ukraine, China's top overseas supplier, was lacklustre last week following news of the auctions.
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