March 7, 2009

China's state grain buying agency is likely to miss the target of soy and corn purchases for state reserves, an agency official said Friday (Mar 6).

Bao Kexin, general manager of Sinograin, said the amount may not be fulfilled as not all farmers are willing to sell to them.

Soy purchases may suffer the most as many farmers were unable to dry out their soy crops to meet the strict moisture requirements of the state reserves, Bao said.

Bao said China's oilseed reserves were still not high enough, since the FAO recommends holding at least 17-18 percent of annual consumption in reserve. Bao said China's wheat reserves were now about 30-40 percent but soy were far below the safety level.

Sinograin has also built up reserves of imported soy, which traders estimated to be at two million tonnes.

He said Sinograin will sell its stocks if prices rose above the level that was paid for them originally. Last year, Sinograin bought soy at the government price of RMB3,700 per tonne and corn at RMB1,500 per tonne, higher than current market prices.

China has been buying up crops to shore up farmers' incomes, which are under pressure due to falling demand after five years of bumper harvests. The government plans to buy up to 6 million tonnes of soy and 40 million tonnes of corn.

Sinograin had purchased 3.5 million tonnes of soy and 27 million tonnes of corn from farmers by the end of February.

US$1 = RMB6.84000 (Mar 7)