December 13, 2007

 

China selling corn and wheat reserves, orders cities to set up reserves

 

 

In a sign reflecting the rising tempo in China's fight against rising inflation, which has risen to 11-year highs due to rising food prices, authorities are releasing more wheat and corn reserves and ordering 36 cities and regions to set up emergency fuel and food reserves.

 

Plans are afoot to sell another 500,000 tonnes of corn from reserves to feed mills in the south next week on top of sales this week to help tame food-led inflation.

 

However, bird flu concerns among chicken breeders have cut corn demand.

 

The sale on Dec 18 was in addition to the auction this week, during which only half of its planned amount were sold, the China National Grain and Oil Trade Center said.

 

Feed mills, in anticipation of lower prices, were not active in bidding on Tuesday's auction due to bird flu worries. Breeders slowed the restocking of chickens upon news of fresh outbreaks. Feed demand also declined due to news of more outbreaks expected over winter and spring feed mill officials said.

 

The agriculture ministry warned of a "very high" possibility of outbreaks of bird flu during the winter and spring, particularly in the south, after a 24-year-old man died last week of the H5N1 strain of bird flu, in the first case in China since June. Bird flu fears in Nanjing went up several notches when the military ordered soldiers not to eat chickens after a local regiment commander was diagnosed with bird flu.

 

Sales have been falling by 15 to 20 percent this week from a month ago, said one trader with Shandong Liuhe Group, one of the country's largest feed mills.

 

On Wednesday, Dalian corn futures prices fell all across the board on the reserve sales. Physical prices, which was at a record high last month, also fell as much as 3 percent from Tuesday.

 

Besides corn, China has increased wheat sales this week to 4.5 million tonnes, one million tonnes more than last week, to cool food prices, which rose 18.2 percent in November, leading the country's inflation to an 11-year high.

 

The wheat auction was also the single-week highest this year in anticipation of the peak period for consumption.

 

The National Grain & Oil Trade Center announced yesterday that the grain wholesale and trade center of Anhui province is scheduled to auction 2.48 million tonnes of national wheat reserves while Henan province's grain trade market will put up 2.02 million tonnes.

 

Meanwhile, five national commissions of China ask 36 cities and regions to set up emergency fuel and food reserves, reports the State Grain Administration (SGA).

 

The prices of wheat and flour, soybean, edible oil, as well as corn in the South has gone up significantly recently and the commissions want food and fuel suppliers in all regions to ensure supply uninterrupted in emergencies.

 

Municipalities like Beijing, Tianjin and Shanghai have to make sure regional reserves of fuel and food can meet market demands for over ten days.

 

The reserves must have those reserves in small packages for easy distribution and all regions were to monitor the market closely.