August 10, 2009

China will grant subsidies of RMB150 (US$22) per tonne to corn crushers in four regions to help them recover processing losses, industry analysts told Reuters on Friday (August 7).

Valid from August through November, the subsidies will go to crushers in the northeastern provinces of Heilongjiang, Jilin and Liaoning and the Inner Mongolia region in the north, where the state corn reserve auctions are held.

Analysts also said the grant was much anticipated by the market as crushers have shown have shown lukewarm interest in state reserve auctions in the last three weeks after facing losses.

After corn, the market hopes Beijing will also offer subsidies for soy, of which China is the world's top buyer and for which prices have risen recently above the domestic spot market.

In a bid to stem rising prices and relieve tight supplies in key agricultural regions, China has since July 21 started auctioning state corn reserves with weekly offer amount of 2 million tonnes.

But buyers have shown limited interest in the three weekly sales held so far, which recorded combined sales of 2.5 million tonnes, a fraction of the country's total reserves of 40 million tonnes, as many processors face losses on surging corn costs.

The more closely-watched soy auction also barely drew any real buyers, with the third attempt on Wednesday seeing a tiny sale after two previous auctions failed to attract any interest.