January 21, 2011

China gives corn purchase priority to state reserves

China has instructed some big corn processors to temporarily cease buying corn from farmers so that the government can make purchases for state reserves, according to industry sources on Thursday (Jan 20).

The move comes as state reserves have dwindled to the lowest level in years while domestic demand has outpaced production, putting further upward pressure on food prices.

A corn processor in Jilin province, the country's largest corn area, has confirmed the ban. Some local big players, such as Dacheng Group, have already stopped buying corn from farmers.

The Chinese government has been releasing corn from state reserves over the past two years after a drought-hit harvest in 2009 caused a big deficit in supplies. Corn processors, which produce corn starch and sweetener among other products, have been competing with feed mills for supplies.