Corn auction volume surges 9-fold this week compared with last week

According to an official Chinese website, China will auction 3.4 million tonnes of state reserve corn this week, 9 times higher than last week's volume, of which 3 million tonnes come from the three northeastern provinces and Inner Mongolia.

China began auctioning state reserve corn in April this year, one month earlier than last year. The Chinese government's temporary reserve purchase policy for corn led to growth in state reserves, but because the purchase price was higher than the international market price, it was very difficult to sell this corn on the international market. In the marketing year ending April 30, 2015, the amount of corn purchased by the Chinese government for reserves reached 82 million tonnes, higher than traders' earlier expectations.

In order to stimulate domestic corn consumption demand, the Chinese government also increased subsidies for corn processing plants, which may help increase the volume traded at this week's auction. By contrast, the auction held last month saw sluggish trading, because the government set prices relatively high while domestic corn demand was weak. At the previous weekly auction, a total of 367,300 tonnes of corn was offered, with actual traded volume of only 17,541 tonnes.

The Chinese government's auctions of temporary reserve corn have already caused domestic corn prices to fall. On Monday (May 4), corn at Shenzhen port was quoted at 2,450 yuan per tonne (equivalent to 395 US dollars), down 3% from a month earlier. By comparison, on Monday the barge quote for US No. 2 yellow corn at the US Gulf was 4.2125 US dollars per bushel, equivalent to 165.8 US dollars per tonne.