January 7, 2008

 

China buys corn in northeast region to fill reserves
 

 

China has been buying corn in northeast major producing regions since late last month to fill state reserves, sources familiar with the situation said on Friday (January 4, 2008).

 

The government plans to buy at least 4 million tonnes of corn at prices around current cash prices, they said.

 

The purchase is likely to last until the Lunar New Year holiday in early February, they said.

 

"The government needs to replenish its reserves for (implementing) future macro controls," said an analyst with a government think tank.

 

China has sold 460,147 tonnes of corn from its state reserves since early last month, or 23 percent of the 2 million tonnes it planned to sell, to stabilize feedmeal prices.

 

Corn prices were lower as a result.

 

"Corn cash prices may have seen a bottom, and the purchase will help prevent a further fall in corn prices," said an analyst with COFCO Ltd.

 

The State Grain Administration said Friday that China aims to guarantee the stability of its grain prices in 2008 through more macro controls.

 

China has issued a series of measures to curb grain exports, including grain export quotas and export taxes, after its consumer price index growth reached an 11-year high of 6.9 percent in November, driven by food price inflation of 18.2 percent.

 

The government wants to curb the surge in food prices but doesn't want to discourage farmers from planting grains, said analysts.

 

Friday, the National Development and Reform Commission said it will buy 500,000 tonnes of sugar from Jan. 15 to stabilize falling domestic sugar prices.

 

The base price was set at US$481/tonne compared with wholesale prices below US$468/tonne last week.

 

"The move will likely help cash prices rise, but the reaction of sugar futures (could be limited) due to insufficient funds (in the futures market)," said Zhang Fangfang, an analyst at Shanghai Jiuheng Futures Co.