Corn Products China News

China canceled the purchase policy of corn for temporary storage and the purchase was ended on 31 April. Without any new policies issued, China's corn market enters the period with policy vacuum. The purchase volume of corn for temporary storage hit a record high – 125 million tonnes. Most of homegrown corn is absorbed by the state and that in the market is basically consumed at the end of May. When waiting for the state to release the inventories, the price drop of corn slows down in May, USD0.09/t lower than that in last month.

As the corn price remains stable, the prices of some downstream products increase. For example, the market price of DDGS increases by 15.84% MoM in May. However, those of some like corn oil keep falling. Fortunately, as the palm oil price continues to rise, corn oil (competing product for palm oil) still enjoy price advantage.

Regarding the deep-processing enterprises for corn, some suffer from negative impacts. Meihua Bio fails to reach an agreement with CJ Group in the reorganization; Brazil imposed anti-dumping duties on Chinese citric acid enterprises, which hindered the citric acid export in China.

The import volume of corn met an irrational increase in March – YoY rise of 1,037.82% and MoM rise of 823.78%. In earlier stage, China issued many policies to reduce the domestic inventories. Therefore, importers imported a large quantity of corn in advance as they were worried about the import will be limited in later period.

In May, most of corn in the domestic market is policy-oriented corn. On 6 May, Jilin promoted the auctions for the old corn. Meantime, the State Administration of Grain also has initiated the directional auction for the corn stored for more than one year each week since 27 May. Coupled with that the corn inventories will be released in later period, the policy-oriented corn will take a lead in the market. What's worse, as the auction price is always lower than the market price, it is predicted that the domestic market price of corn would keep falling, which affects the prices of some downstream products.

The USD/RMB exchange rate in this report is USD1.00=RMB6.4565 on 3 May, 2016, sourced from the People's Bank of China. All the prices mentioned in this report will include the VAT, unless otherwise specified.