Mar 16th, 2012

Corn futures in China, the second- biggest consumer, rose to record on speculation supply may be less than expected and that the government may continue to allow prices to rise before selling from stockpiles.

Corn futures for September-delivery on the Dalian Commodity Exchange rose as much as 1.1 percent to 2,497 yuan ($395) a metric ton, surging past previous high of 2,478 yuan on Feb 14, 2011. It trimmed gains to close at 2,487 yuan. Most-active contract has advanced 9.4 percent this year.

China’s reserves bought 1.2 million tons of domestic corn so far this year compared with 11 million tons last year, Jilin Corn Center Wholesale Market said on its website yesterday, citing Song Zhiyuan, head of procurement and sales planning division of China Grain Reserves Corp. Prices at northern ports may rise to 2,500 per ton from about 2,400 yuan, Song said. The government won’t likely sell imported corn unless prices turn volatile, Song said.

“Speculators interpreted this as that the government may tolerate gains until the crops are planted so it won’t reduce planting interest,” Zhang Qi, analyst at Yigu Information Consulting Ltd., said by phone from Dalian. “Skepticism that last year’s output was inflated is also gaining traction.”

China has enough corn stockpiles and good harvest last year to satisfy its need this year, Nie Zhenbang, head of the State Administration of Grain, said March 6. Imports may rise to a record 7 million tons in the 2012-2013 marketing year from 4 million tons in 2011-2012, Rabobank International said Dec. 5.

“Regardless what the actual output is, everyone agrees planting expanded last year, and the crops were decent, so I don’t think there is real shortage of corn,” Zhang said. China still has about 1 million tons of U.S. corn which it ordered last year but are yet to be shipped, and state granaries are “pretty much filled” by the 2 million tons to 3 million tons already imported, so “it won’t likely order state reserves to go out and buy more imports now,” Zhang said.

- William Bi in Beijing at Bloomberg.