Corn futures climbed for the second consecutive day yesterday, driven by dynamic domestic demand and strong spot prices.

 

Corn slated for delivery in May next year, the most actively traded futures contracts, rose 23 yuan (US$3) to 1,614 yuan (US$204) a ton yesterday on the Dalian Commodity Exchange. That followed a 25 yuan (US$3.16) jump on the previous day of trading.

 

The spot price of corn was traded at around 1,400 yuan (US$177) yesterday in Northeast China's Jilin Province, a major corn-producing region.

 

The price jump, analysts and industry players said, was mainly fuelled by robust domestic demand as more corn is being used to produce bio-fuel such as ethanol. It is also used to produce sugar and animal feed.

 

The amount of corn being used to produce fuel ethanol and corn alcohol is surging as international oil prices keep rising.

 

China, now the world's third-largest fuel ethanol producer after Brazil and the United States, is planning to produce about 6 million tons of ethanol by 2010 and 15 million tons by 2020. It produced 1.02 million tons last year.

 

"The strong spot price and the robust demand from the corn processing industry such as fuel and animal feed production are the main factors pushing up the futures price," said Yu Mengguo, an analyst at Jing Peng Futures Brokerage.

 

"The trend is likely to continue as the situation is not expected to ease up soon," he added.

 

As a result of the strong domestic demand, China's corn exports shrunk dramatically this year.

 

(China Daily December 13, 2006)