INVESTORS have piled into corn futures in China at a record pace, speculating that prices will sink further when for the first time in a decade the corn crop goes on sale without State price support.

    Open interest in Dalian corn futures, a measure of liquidity in a contract, hit an all-time high of 2.84 million lots Thursday, equivalent to 28.3 million tons of grain worth 48.1 billion yuan (US$7.2 billion) and about 13 percent of China’s new harvest.

    Hitting the market in late September, this crop will be priced according to market forces, rather than dictated by the government.

    China announced in April it would not carry out its annual stockpiling program for the coming harvest, ending a system that paid farmers high prices for their corn to boost rural incomes.

    Open interest has more than doubled in just under three months.

    Earlier this month, the front-month contract hit its lowest in nearly seven years, while the January contract , reflecting the new crop, has fallen 14 percent since June and is hovering around 1,450 yuan per ton.

    Once it became clear that “the State won’t manage this product, the market became quite interested in corn,” said Meng Jinhui, analyst at COFCO Futures, pointing to a steady increase in positions since the first half of the year.

    The rapid inflow of cash into one of Dalian’s biggest contracts measured by open interest highlights uncertainty about how China’s farmers, facing a global glut and weak prices, will manage to sell their big new crop without government support.

    Views diverge on the direction of prices.

    After stockpiling coupled with slackening domestic demand, China’s reserves have been saddled with about 250 million tons of corn, more than China can consume in a year, with the quality of the grain deteriorating.

    Lower market prices would stimulate consumption, helping to rebalance supply and demand.

    But lifting farm incomes is a priority for the government, making it nervous of allowing prices to fall too far.

    Earlier last week the finance ministry reintroduced a tax rebate for exports of corn products. (SD-Agencies)