July 29, 2010

China to stop procurement on overpriced grains

China will order government reserves to halt buying of domestic grain and oilseed products if prices surge above set levels to maintain market order, the National Development and Reform Commission said.

State-owned China Grain Reserve Corp, the top government reserve manager, must improve its management of the reserve-buying process and prevent contracted companies from breaking rules for the sake of profit, the planning body said Wednesday (Jul 28).

Companies bid up prices of harvested summer grain recently after bad weather in some regions, the commission said. This has disrupted the grain market and made it more difficult for the government to meet its inflation targets, it said.

"Some companies blindly chased each other and bid up prices, causing farmers to hold off on selling and companies to hoard," the statement said. Reserves must halt government procurement if prices exceed set floor limits, it said.

Regional grain and pricing authorities must also step up inspection of the food reserve management process to stamp out price manipulation, the statement said. Authorities must investigate companies contracted by state reserves which fabricated numbers or double-count grain purchases to earn more subsidies, the commission said.