After four years of de-stocking, China is to end 2019 corn auctions

8 Oct 2019 | Johnny Huang

China’s national grain trade centre (NGTC) has announced that state-held auctions for corn reserves in the 2019 calendar year will conclude by the end of next week, which would mark an end to four years of auctions.

“After the research and decision from concerned departments, the auctions for national temporary corn reserves will be suspended as of October 18, 2019,” said NGTC in a statement published on its official website.

NGTC did not specify the reason for ending corn auctions next week.

China also concluded corn auctions in October last year as the new harvest of corn crops normally enters the market at this time each year.

Although there are still two more rounds of corn auctions to be held this Thursday and next Thursday, with each offering nearly 3.5 million mt, the country has already sold nearly 22 million mt of corn reserves in 2019 through 19 rounds of weekly auctions since late May this year.

However, the pace was much slower compared to the sales volume of more than 100 million mt in 2018.

China has been offering to sell between 3.5-4 million mt of corn reserves during every week’s auction this year, but weekly sales volumes plunged from more than 3 million mt in late May to as low as 105,000 mt two weeks ago.

The overall clearance rate of corn auctions this year was below 30%, out of a cumulative offer of more than 73.5 million mt, reflecting poor demand in the world's number one feed consumer.

China has been cutting down its massive corn reserves through state auctions since 2016 and has been aiming to transform the domestic corn market from a policy-dictated system to a market-driven one.

Earlier this year, officials from China’s Ministry of Agriculture and Rural Affairs (MARA) said “2019 is likely to see the last round of destocking in China,” meaning that the country could end state auctions after four consecutive years.

The market expects China to still have around 56 million mt of corn reserves by the end of this year’s auctions.

China’s corn production this year is expected to reach more than 255 million mt of which 174 million mt will be used in animal feed and 84.5 million mt is expected to be consumed by industry including ethanol producers, according to recent estimates from MARA.