January 9, 2008

 

China to buy 4 million tonnes of corn to prop up prices

 

 

China's corn prices, which have fallen due to a slowdown in animal production last month, has prompted authorities to pledge to buy 4 million tonnes of corn from the grain production areas of north-eastern China.

 

China Grain Reserves Corp (Sinograin) will buy the corn when prices fall to between RMB 1,380 and 1,420 (US$189.70-$195.20) per tonne, about 1 to 3 percent below current levels.

 

The move was made in response to the slow recovery in pig breeding activities, which stifled buying, officials said.

 

China's consumer price inflation reached an 11-year high last year due largely to food price increase and authorities are seeking to keep farmer planting interest alive by propping up prices.

 

Grain prices have been weakened since December when the government held auctions of thousands of tonnes of corn to keep prices down and keep inflation in check.

 

The result is that prices have fallen 5 percent in Dalian in northern China.

 

Now, as prices cooled, authorities are buying corn from farmers to keep prices up.

 

The government got an indication of how slow demand is when an auction of 500,000 tonnes saw just 4 percent sold.

 

While farmers may have found it tempting to cash in on high pork prices currently, Beijing's promises to keep price in check have given pause to buying.

 

The various subsidies the government has ladled out may only seem attractive to large-scale pig farms and not to the typical peasant farmers, where the bulk of China's pigs come from, according to Sun Zhiqiang, an official with the China Feed Industry Association.