China’s government is set to start stockpiling domestic corn and soybeans from this year’s harvest and will reportedly offer farmers substantially higher prices than it did a year ago, which could boost demand for imports.
Industry sources in China say the government will pay 4,600 yuan/metric ton ($20.08/bu.) to soybean producers in major northeast growing areas, 15% more than the 4,000 yuan/ton it offered last year.
Beijing will pay 2,100-2,140 yuan/metric ton ($8.56-8.72/bu.) for domestic corn supplies in the northeast corn growing belt, an increase of about 7% from last year, an industry source told Reuters News Service.
This will mark the fifth year in a row that China has conducted a so-called temporary soybean stockpiling program. Purchases of domestic soybeans under this program have totaled 14.6 million tons, according to a Bloomberg News report citing data from researcher Grain.gov.cn.
Sources have indicated what volumes of corn and soybeans China’s government intends to stockpile from this year’s harvest. The stockpiling program normally runs through the end of April.
The stockpiling effort is expected to keep domestic soybean prices above prices for imported beans, supporting continued strong crusher demand for imports. The government purchase price is about 4% above the current price of imported supplies at Chinese ports and in the recent weakness in soybean future should help make imports even more attractive.
The China National Grain and Oils Information Center has forecast that China’s soybean imports will rise to 4.8 million metric tons in November from 4.03 million in October.
At the same time, slower movement of South American soybeans into the world market could allow U.S. exporters to capture more Chinese business in early 2013.
Brazil’s soybean planting is progressing at a roughly normal rate, but not as quickly as last growing season, when the crop went in the ground rapidly and early harvest in the center-west soybean belt started in late December. Soybean planting has fallen well behind schedule in some of Argentina’s key growing areas due to excessive rains and flooding there.
U.S. Gulf soybean basis bids remain extremely strong with spot bids at 90-98¢ over January futures, up sharply from 42-58¢ over January a year ago.
CIF Basis bids for February delivery of soybeans to the Louisiana Gulf export terminals surged 13-25¢ on Monday to 93-110¢ over March futures, suggesting new demand for export shipments during that period.
China has been out of the world corn market in recent months due to high world prices and a bumper domestic crop. The CNGOIC forecasts 2012 Chinese corn production at 201 million tons, while USDA sees production at 200 million tons.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.