China: Show Me The Corn

The Chinese government's weekly corn auction managed to find buyers for just about all the corn on offer in the northeast of the country earlier today.

Of the 799,400 MT of corn on offer 796,700 MT found buyers at higher prices than last week's auction despite newly introduced restrictions on who can buy, and a ban on reselling.

It seems that all that this new buying criteria has done is, for those not allowed to buy at auction, to up their bids in an attempt to persuade farmers still sitting on stocks from 2009 to sell.

Hardly an effective way of reigning in inflation.

Government officials meanwhile insist that they have plenty of corn to sell and that there is no shortage.

If that was true, and quashing rising food prices was their main concern, then surely there is a very simple solution to all of this. It's not rocket science is it?

Super secretive China are supposed to have state reserves of around 50 MMT of corn, and have reputedly produced a crop of around 150-165 MMT in recent years. The problem with a crop of that magnitude is that a 10% overstate on just one season's production slashes 30% off their ending stocks. Just three years of 10% overstates virtually wipes out their "on paper" ending stocks entirely.

Or are you going to tell me that they wouldn't do a thing like that?