China vows to stockpile new corn, soy crops

 

 

China on Monday (October 12) pledged to extend its controversial soy and corn stockpiling scheme into the new crop year, in a move to protect farmers' interests and ensure supply at the risk of inflating imports for a second year running.

 

The government did not state the prices, but last year's scheme has been criticised by traders as the purchases at higher-than-market prices led to a boom in cheap imports. The new crop harvest is due to begin within weeks.

 

The government will also increase its minimum purchase prices of wheat by 3.4 percent next year to RMB1,720 (US$252.05) to RMB1,800 (US$263.78) per tonne in an effort to keep farmers grow the crop, according to a report posted on the central government web site (www.gov.cn) after Monday's meeting chaired by Premier Wen Jiabao.

 

The report said "returns on planting grains are still low and grain supply would become tight in the years with frequent natural disasters."

 

It said the government would continue offering incentives so that local governments and farmers would have initiatives in increasing grain production.

 

China's farm policy has become a key factor for global grain markets, particularly soy, of which China is the world's biggest importer. Purchases shot up 20 percent this year after the government bought record volumes of its domestic crops.

 

Traders said the government was likely to offer prices higher than last year, when the government bought more than 6 million tonnes of soy at RMB3,700 per tonne and 36 million tonnes of corn at RMB1,500 per tonne for state reserves.

 

Farmers in major soy growing area in the northeast were reluctant to sell at lower prices as bad weather this year could reduce their harvest by as much as 20 percent versus last year.

 

Wang Liguo, a dealer with Galaxy Futures Co. Ltd in Heilongjiang, the country's largest soy area said farmers and local crushers are waiting for government policies as farmers are not willing to sell at lower than last year's price.

 

US$1 = RMB6.82 (Oct 13)