December 26, 2008

China seen to curb corn exports in 2009

China may curb corn exports next year as strengthening prices prompted Beijing to drop its initial plan to allow more shipments, according to traders.

China may issue fewer corn export licenses next year than expected, and will not provide trade incentives as it seeks to control prices and ensure domestic supply, said traders.

The government may also decide to delay issuing the licenses, the traders added.

China's corn prices have increased from a two-year low after the government started to buy domestic corn in an effort to boost farm incomes. The government plans to buy 20 million tonnes of corn from farmers to boost state reserves, bringing the total number of purchases to 30 million tonnes, said the China National Grain and Oils Information Centre.

Earlier this month, China was reported to be considering as much as 5 million tonnes in corn export quotas due to high supply, and controls on shipments had created a domestic glut. The lack of exports from China is seen to help US grain suppliers hold onto their share of the Asian market.

May delivery corn on the Dalian Commodity Exchange ended 0.2-percent higher at RMB1,527 per tonne. The most active contract increased 6 percent since touching a two-year low of RMB1,440 on December 12.

CBOT corn prices have dropped 50 percent from a June record, as slowing global growth reduced demand for raw materials.

China exports corn mainly to Japan and South Korea, but shipments in the first 11 months of 2008 plunged 95 percent to 235,379 tonnes after Beijing in January levied taxes and stopped issuing new export permits, according to customs data.