(Reuters) – China will continue to buy soybeans and corn for state reserves from farmers this year, a move that is expected to keep domestic prices higher than the global market, triggering more imports.
China, which buys more than 60 percent of soybeans traded in the world, had already been forecast to import a record volume of the oilseed in 2013/14 to meet robust feed grain demand amid rising meat consumption.
The government will buy domestic soybeans at 4,600 yuan ($760) per tonne, the National Development and Reform Commission (NDRC) said, unchanged from last year’s level, and nearly 10 percent higher than current U.S. bean prices <0#S:>.
“Giving falling global soy prices, the government has not raised its purchase price this year. Domestic output is no more a concern for the government,” said one analyst with an official think-tank.
Chicago Board of Trade soy futures have lost 6.8 percent since hitting this year’s high of $14.06 a bushel on Aug. 27 as better-than-expected U.S. harvest replenishes supplies.
China’s own soybean output, used mainly to make tofu, continued to fall for the third year in a row this year, with output forecast at 12.2 million tonnes, down 6.5 percent from last year, said the China National Grain and Oils Information Center (CNGOIC).
The NDRC on Friday also said Beijing would buy domestic corn at between 2,220-2,260 yuan per tonne for state reserves.
This price, announced earlier in the year, has also triggered buying interest in U.S. corn, where prices have been pressured by a record harvest.
U.S. corn futures have fallen for the last four months to trade around the lowest since August 2010.
China, the world’s second largest corn producer, stockpiled more than 30 million tonnes of corn last year.
Beijing, for the first time, has agreed to offer subsidies to qualified domestic companies to encourage them to buy domestic corn and rice in the growing areas due to tight state storage capacity, said the commission.
Qualified companies located outside growing regions will be given 140 yuan per tonne for corn or rice purchases in the northeast areas, it said.
“U.S.corn prices are 500-600 yuan/tonne cheaper than domestic corn and the subsidy is too small to have any impact on imports,” said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd. (JCI).
Although private mills are actively importing cheap corn, Beijing’s huge state corn reserves may leave the government reluctant to issue more import quotas to state-owned companies next year, analysts said.
