June 8, 2009

China plans to sell some of the state corn reserves to processors in the northeast following last year's heavy procurement by the Chinese government which tightened supplies in the region and pushed up prices, traders said on Friday (June 5).

The government was also likely to offer RMB100 (US$14.63) per tonne in subsidies to some designated processors in the four provinces in the northeast where its stockpiling campaign had driven up prices higher than elsewhere, the traders added.

This decision may benefit processors such as China Agri-Industries Holdings Ltd, owned by state grain trader COFCO Co Ltd, which was seriously affected by higher raw material costs due to Beijing's six-month stockpiling programme late last year.

Corn supplies were tightened after the Chinese government bought 35 million tonnes out of a total harvest of 60 million tonnes in the northeastern region. China's corn harvest was about 165.5 million tonnes last year.

Due to the record corn harvest last year and coupled with weak demand from feed mills and corn processors, China decided to purchase corn for state reserves to help boost farmers' income.