November 29, 2011

China's Grain Reserves Corp has started stockpiling soy from this year's crop, setting its purchase price at RMB4,000 (RMB627)/tonne, the State Administration of Grain said Monday (Nov 28).

The reserves are a regular means to shore up domestic prices, boost farmers' income and soak up excess supply.

The stockpiling programme will run from November 23 to April 30, the agency said.

The bureau's announcement confirms earlier expectations among traders. The price offered by the government, 5% higher than last year's price, is still lower than the current market price, which has been supported by a lower domestic harvest.

Traders said the government had been buying US soy to refill reserves as it may not be able to source enough at the price offered to farmers.

Production in China, the world's top soy importer, has fallen far below what it needs as local governments encourage production of grains rather than the oilseed.

"The price offered by the government is lower than farmers were expecting. They may not be very happy, which may cause a further decline in next year's harvest," analysts said.

The country's soy output this year may fall 10.5% to 13.5 million tonnes, while imports will continue to grow to 58 million tonnes in 2011-12 (October-September), up from 52.3 million tonnes in 2010-11.