China to keep building grain reserves

China will keep stocking grain for its state reserves and encourage companies to build up commercial storage in a move to prevent sharp falls in prices, a senior official said on Monday. Confronting an abrupt economic slowdown, Chinese policy makers are seeking various means to increase incomes for farmers, the most populous and vulnerable group the Communist Party has put on its policy priority list.
Chen Xiwen, Director of the Office of the Central Rural Work Leading Group, told a news conference the government would also increase the price floor for government grain purchases. "Agricultural product prices are decided by market supply and demand rather than the government. What the government could do is to set a minimum purchase price to prevent prices from falling excessively," he added.
Chen also said Beijing would consider increasing grain exports to better balance domestic and global demand and supply. "If there are demands in the international market, China will increase some grain exports at reasonable prices so as to ensure global grain security as well as promote a balance in domestic grain demand and supply," Chen said.
The government planned to offer farmers up to 120 billion yuan ($17.53 billion) of subsidies this year, up from 102.9 billion yuan in 2008, to increase their incomes and protect them from suffering a heavy blow from the economic slowdown. On top of that, Beijing would increase the minimum grain price for state purchases by an average of 0.22 yuan per kg, which would add more than 110 billion yuan of extra income for farmers based on 2008 production of 530 million tonnes, Chen said.
The National Development and Reform Commission, the top economic planner, announced last month it would lift minimum purchase prices for rice by more than 10 percent to shore up farmers' incomes. The floor price for buying the main rice varieties from farmers will rise by 13 yuan ($1.90) for every 50 kg.
This will lift the price of early long-grain to 90 yuan ($13.2) for every 50 kg and medium and late long-grain to 92 yuan ($13.5). Round-grain rice will rise to 95 yuan ($13.9). China plans to add to its reserves by buying a total of 22.5 million tonnes of rice, 6 million tonnes of soybeans and 30 million tonnes of corn, supporting the domestic market after a record grain harvest and weak demand caused prices to slip.