China looks to stabilise prices by increasing soy and corn reserves

From December 1, the Chinese government will begin buying soy and corn in north-eastern areas, its major grain production base, according to an announcement released by the National Development and Reform Commission and several other authorities.

The state purchase plan is scheduled to last until April 30, 2010.

It has set corn's purchase price for temporary reserves at 1.48 (US$0.22) to 1.52 Yuan/kg, and that of soy at 3.74 Yuan/kg, compared with 3.7 Yuan/kg during last year's stockpiling.

Meanwhile, the government will offer subsidies for soy and corn purchases, at 0.16 Yuan/kg and 0.07 Yuan/kg, respectively, if purchase prices are higher than the market offer.

However, the government has not revealed the amount of soy and corn it plans to purchase this year. Analysts say this development is favorable to stabilizing market prices and protecting farmers' interests.

China purchased a total 5.25 million metric tons of soy and 30 million metric tons of corn for state reserve last year. As a result, many local soybean crushers have suspended production from time to time, unable to sustain the high costs.

Soybean subsidies will be given to China Grain Reserves Corp, which purchases agricultural crops for the government, and certain northeast crushers that buy the new crop.