Along with a Tight Supply and an Increase in Prices, Corn Transactions of the First Auction Were Hot

By CnAgri2017-05-15 11:11:07 Print

On May 5th, 2.527 million MT of temporarily-stored corn were planned to be auctioned for the first time in 2017/18, including 0.513 million MT of corn produced in 2012 and before, and 2.004 million MT of corn with installment credit that were produced in 2013. Corn produced in 2012 and before would be designedly sold to fuel alcohol companies, and 2 million MT of corn with installment credit would be fitness for further processing and livestock feed producers. The transactions of the first auctions were hot, of which the transaction rate of sales-targeted and installment-credit corn was 72.0% and 90.8% respectively, both at a premium.

The main reasons for hot transactions are as the followings:

(1) Grain-consuming companies expect corn would be in a tight supply and the prices would go up. On April 30th, after the end of corn purchase, there was not much left in the northeast, and the supply of corn in Huang-Huai Region of north China also was limited, so corn would be in a very tight supply in May. Considering of warehouse-out cycle, it takes one month to delivery corn auctioned this time to grain-consuming companies, so some companies were active in auctioning and prepared for stock-up in advance.

(2) Compared to market-driven corn, auctioned corn still has certain price advantage. Sales-targeted corn is mainly located in the south and Huang-Huai Region of north China such as Sichuan, Guizhou, Hebei, Shanxi and Shandong. Considering quality difference, transaction price RMB 1,425/MT of sales-targeted corn plus the expenses such as ex-warehouse still is far less than local corn market price. Transaction price RMB 1,425/MT of corn with installment credit mainly distributed in the northeast is in the scope accepted by grain-consuming companies.

Table 1, Transaction Situations of Temporary Corn Auctions for the First Time on May 5^th, 2017
Unit: 1000MT, RMB yuan/MT

Source: Arrangement of Data from the State Grain Administration