Chinese farmers in some major corn-growing regions have shown reluctance to sell corn at prices lower than what they had expected due to higher production costs and grain loss from natural disasters.

Data from the Ministry of Agriculture show that the average corn purchase price in China grew 5.8% from the beginning of the year to 2,309.7 yuan (366.94 U.S. dollars) per ton on Aug. 30.

Prices began to fall after September, and average prices have remained at around 2,170 yuan per ton since Oct. 18, down by more than 6% compared with late August.

In northeast China’s Jilin Province, corn production dropped by up to 30% in some major growing regions because of production losses from wind and insect disasters earlier this year.

Meanwhile, prices of local agricultural materials surged by 15 to 20% this year, said Deng Anfu, head of the Songyuan grain depot under the China Grain Reserves Corporation.

“Farmers have very high expectations for corn prices this year. They are unlikely to sell at prices below their expectations,” Deng said.

The low purchasing price was partly due to weak demand from corn-processing companies, which have been affected by the current economic slowdown.

China’s economy grew by 7.4% year on year in the third quarter, slowing for the seventh straight quarter and down from 7.6-% growth in the second quarter and 8.1-% growth in the first quarter.

Experts said corn prices will not see sharp drops in the future due to the relatively inelastic demand for feedstuff in China.

Zheng Guichen, deputy manager of Changchun Dacheng Industrial Group, a leading corn processor in China, said the country’s feed-stuff demand has seen annual growth of around 5% in past years.

Zheng forecast that China will demand 180 million tons of feed-stuff this year.

“Among the total demand, 120 to 130 million tons are inelastic and 65% is made of corn,” he said.

Source: Nov 2012

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