Corn prices in China fall for the first time in a year

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Corn prices in China fall for the first time in a year

BEIJING SINGAPORE Reuters : For the first time in a year, corn prices in China's key Shandong hub have fallen to the same levels as wheat, leading some feed producers to switch back to using more yellow grain, traders and analysts said.

Corn prices in rare animal-feeding hubs like Shandong province had traded for most of the past year at a key sustained premium to wheat. That's because corn production hiccups and a drawdown in stocks last year led to a decline in supply which pushed domestic prices back to record highs.

Costly corn in turn encouraged industrial corn users to look for alternatives, with some feedlots switching to using record volumes of feed-grade wheat.

The lower prices of corn in China have prompted some feed producers to switch back to wheat https: fingfx.thomsonreuters.org. ChinaShandongWheatCorn.png gfx ce jnvwewxqyvw ChinaShandongWheatCorn.png

However, with local corn prices as 2021 rolls on as the harvest rolls on, wheat's price advantage relative to corn has suddenly evaporated.

Wheat use in feed in general is expected to fall further, said Li Hongchao, analyst with Myagric.com, an agriculture consultancy. Prices of the new wheat crop should be lower than corn, Li said.

As of Thursday, corn prices in the Shandong province, a livestock hub in northern China, were at 2,600 yuan per tonne, down 15% from their best prices in March and below wheat prices in that area.

There is no such thing as loyalty. We just look at prices, said a purchasing manager for a livestock producer based in northern China that has cut wheat use in their feed product last to 5% from 10% previously.

We use more corn as corn prices are falling back, said the manager, who declined to be named because he was not authorised to speak to media.

Wheat prices have averaged about 350 yuan per tonne less than corn in Shandong in 2021, compared to a roughly 250 yuan premium from 2019 until 2020, data from Shanghai JC Intelligence shows.

With corn prices now equivalent to or less than wheat, feed producers have significantly reduced wheat use, JCI said in a report this week.

Wheat use in poultry feed in central China has decreased from around 40% of the feed mix earlier this year to as low as 20% in October, while in northern China wheat's percentage in poultry feed has fallen by as much as 40%, JCI said.

Corn prices also slipped below local wheat this week, while corn has been cheaper than southern China since late August in the country's northeastern cornbelt corn.

There is not as much wheat feeding in the northeast. Unless corn prices rise significantly, producers here won't use much wheat, said a purchase manager with a feed producer located in the region.

Rains have recently delayed harvests in parts of northern China, raising concerns about crop quality.

This month the china agriculture ministry lowered its estimate for 2021 corn output due to rain damage.

We will further assess if corn hits the market in large volumes, said purchasing manager.