China has tripled the size of its plan to fill government reserves with domestic corn and may reopen the door to exports to support prices, traders said last month, spurring speculation that soy producers could be next up for aid.
The National Development and Reform Commission approved plans to buy an additional 20 million tonnes of corn for state stockpiles, four times more than traders had expected, an industry source familiar with the results of the meeting said.
Beijing has already bought about 3 million tonnes out of a previously approved 10 million tonnes. In total the purchases could absorb a fifth of China’s crop, the world’s second-biggest.
“The government has decided to buy for state reserves to support prices. Exports may come later but it was still under discussion,” the industry source told Reuters on condition of anonymity.
“By buying altogether 30 million tonnes, the amount should be enough to shore up domestic prices,” added the source.
China is expecting a record domestic harvest of 156 million tonnes this year, with farmers having been spurred on by last year’s surge in prices; that rally has since reversed as tumbling oil prices make corn-based biofuel uneconomical.
But because Beijing has been aggressive in efforts to support local prices to aid its agrarian majority, Chinese corn prices have not fallen as fast as foreign rates. They are now about 10 per cent higher than U. S corn prices in Asia, traders say.
Now that domestic supplies are more than comfortable, Beijing seems to be moving closer to opening the door to exports that it shut down a year ago for fear it might struggle to remain self-sufficient its growing population demands ever more high-protein meat – and thus more corn and grains for feed.
Traders said the government may allow exports of as much as 7 million tonnes next year, but so far no decision has been made. China was the world’s second-largest exporter early this decade but shipments have since fallen to almost none this year.
Meanwhile a domestic surplus grows as demand from feed mills and corn processors stays flat while trading houses have held off buying the new crop, leaving farmers struggling to sell their harvest.
The extra corn purchase also stirred speculation that the government may increase purchases of domestic soybeans on top of the 3 million tonnes purchased already.