China is set to continue to tap international markets for farm commodities in 2011, with the government driving demand this time to cover shortages and replenish reserves that got dangerously run down this year. Commerce Minister Chen Deming told an internal ministry meeting the government will import to shore up reserves of sugar and meat, among other staples, according to a statement on the ministry website on Wednesday.
"Given the growing pressure from price rises coupled with tight supplies of some farm products, securing supplies will play an important role in calming inflationary expectations and curbing speculative activities," the statement said. "We will increase the scale of reserves of daily necessities such as meat and sugar, add to reserves of other commodities as appropriate, and pick the right time to expand imports of goods that are in short supply domestically and replenish central reserves."
It gave no more details of the potential target commodities. But the impact on world prices could be significant, judging by the country's deliberate stockpiling of base metals last year, its sudden call for corn imports this year, and its flip from a major seller to a major buyer of coal since the start of 2009.
China has run down many of its agricultural stockpiles this year to stop strong demand driving up prices. Many markets, especially corn, sugar, cotton and rubber, surged as speculators borrowed cheaply to invest in hard assets and bet on demand outpacing supply.
The government has cooled prices in the past two months by coming down hard on such investors, tightening monetary policy to siphon cash from the market and raising the bar for trades on China's big three commodity exchanges.