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High China Corn Prices Motivate Decision to Stop Corn Exports

Persistent high prices in China's northeastern provinces - despite official reports of a record corn crop in 2005 - are likely the motivation behind China's decision to stop corn exports, reports the U.S. Grains Council China office.

"Unsubstantiated reports indicate that no new export quotas are currently being considered," says Dr. Todd Meyer, USGC senior director in China. "This means that the 4 million metric tons of previously issued exports quotas will expire at the end of February with no new ones in place."

Meyer explains that normally Northeast corn is the cheapest corn in China. "It is too early to tell if we will see a strong rise in prices in the North China Plain region, but many analysts expect one over the next several months."

Auctions of state-owned corn stocks in Jilin and Heilongjiang were expected to lower prices in the Northeast markets, but strong prices have continued. In addition, price increases are now moving down into the supply chain providing further evidence that a tightening supply is driving this price movement. Some of the price increases have been attributed to expanding industrial processing, but Meyer is skeptical that this sector could be the sole reason, despite its rapid growth.

"A drop in production is a likely factor impacting current prices," he says. "The Council's corn tour saw obvious yield drops in key production regions in the Northeast."

Meyer believes the next several months will be critical for the Chinese corn market as corn supplies in the North China Plain tighten and the avian flu situation continues to develop. He notes that predicting whether or not China will issue additional export quotas later in the year is difficult, but the current reports have moved the regional Asian market to locate alternative sources for their immediate corn needs.

China exported 7.59 million metric tons (298 million bushels) of corn in the 2004/05 market year in comparison to U.S. exports of 30.8 million tons (1.2 billion bushels) during the same time.