China’s corn futures rose to a six-month high on Monday, boosted by fears of tight supplies as a destructive worm threatens to slash domestic output.
Fall armyworm, a pest that ravages grains crops like corn and sorghum, has been found in several Chinese provinces and regions since it was first detected in the country earlier this year. It can damage hundreds of hectares of corn in a night, and was expected to soon reach the country’s northeastern corn belt.
The most actively traded corn futures on Dalian Commodity Exchange rose more than 1 percent to 2,007 yuan ($290.63), their highest levels since November 2018.
“The rally on Monday was triggered by reports of armyworm as investors speculated on the expectation that the pest can spread to the northeast and damage crops while they are in prime growing season,” said Meng Jinhui, deputy president of the research department at Shengda Futures.
“Prices are also supported as the expectation that China will import more corn from the U.S. went away with the setback in the Sino-U.S. trade talks,” Meng said.
Trade tension between China and the United States flared up again after U.S. President Trump vowed to hike tariffs on $200 billion of Chinese goods on May 5. China had pledged to buy more U.S. agriculture products during earlier talks
China’s corn futures have risen more than 4 percent in the past two weeks, following the swift deterioration of the Sino-U.S. trade relations.
China will begin to auction corn from state reserves on May 23. However, analysts said the volume available is below market expectations, while the floor prices are above physical prices in the market, further supporting the grain.
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