2010-08-04 15:52

China, the second-largest corn user, sold less from its weekly auction after the government toughened measures to curb purchases as stockpiles declined, said analyst Ding Ling at Shanghai JC Intelligence Co.

Feed mills bought 67 percent of the grain offered at auction of state reserves yesterday, down from 83 percent last week, government data showed. Mills are allowed to buy no more than a month of requirements from these auctions as of yesterday, according to a statement on the website of the auctioneer. There were no purchase restrictions in previous rules published June 4.

Corn on the Dalian Commodity Exchange surged 21 percent in the past year after drought cut the 2009 harvest. China has offered about 1 million metric tons of reserves each week since April in the major northeast producing provinces to cool prices, and allowed the most imports since the 1990s.

"The government has been forced to take administrative measures to restrict bidding and buy time before this year's domestic fall harvest," said Zhang Fangfang, analyst of independent researcher Beijing Shennong Net.

"At the current pace of selling, the stockpiles won't last too long and authorities may have to allow more imports to meet demand or to replenish warehouses," Ding said by phone.

China has ordered 1.2 million tons of US corn this year as of July 22, data by the US Department of Agriculture showed. Growing demand for meat and dairy has spurred livestock production, expanding imports of raw materials used in feed including soybeans and corn.

Price Decline

At auctions yesterday in the provinces of Heilongjiang, Jilin, Liaoning and Inner Mongolia, 667,800 tons of corn were sold out of 1 million tons offered, at an average price of 1,671 yuan ($247) a ton, according to the State-owned National Grain & Oil Trade Center. That's the first price decline since June 22, according to Bloomberg data.

China sold 10.8 million tons out of 13.6 million tons, or 79 percent, offered in auctions in top growing regions from April 13 to yesterday, according to Bloomberg calculations.

Accumulated purchases by mills since May 18 can't exceed three months of requirements, according to the new rules.

The country will sustain its crackdown on hoarding and price-rigging and try to maintain a stable market, the National Development and Reform Commission said July 30. China is allowing more imports to curb "excessive and fast" gains in corn prices, it said.