May 21, 2020 / 7:41 AM / 7 days ago

UPDATE 1-China to auction corn from state reserves in heated market

(Adds background, analyst comments)

By Hallie Gu and Shivani Singh

BEIJING, May 21 (Reuters) - China will start selling corn from its state reserves on May 28, the National Grain Trade Centre said late Wednesday, a move long awaited by the market as supplies of the grain tighten.

Four million tonnes of corn, all from the northeastern corn-belt region, will be offered at the sale, according to a notice published on the trade centre’s website.

In line with previous years, analysts expect more weekly sales to be held until the end of October, when the new crop kicks in.

“The market has been paying close attention to this year’s auction, and hopes the sales can cool down the heated market,” said Meng Jinhui, senior analyst with Shengda Futures.

Corn prices JCI-CORN-HRBN in Harbin, capital of top producing Heilongjiang province, have jumped 15% this year as processors have been caught out by unexpected demand.

“Corn processors in the northeast and feed producers in the south did not stock as much grain earlier because they were pessimistic about demand,” Meng said. “But demand has turned out better than expected.”

Corn stockpiles at northern and southern ports were both lower as of mid-May than last year, COFCO Futures said in a report released on its official WeChat account on Thursday.

Corn processors’ inventories were around 4 million tonnes, below 5.5 million tonnes at the same time last year, and below the average level of the past three years, the report added.

China scrapped a years-long corn stockpiling programme in 2016 and has been selling off the huge inventories of aging grain from state reserves. Beijing sold 21.91 million tonnes from its reserves last year.

It is not known how much corn the government plans to release this year, but it aims to “whittle down the inventories”, said Zhang Dalong, an analyst with COFCO Futures.

“(The auction) is expected to cool down the market. Prices were rising too fast,” Zhang said. (Reporting by Hallie Gu and Shivani Singh; Editing by Richard Pullin)

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