Provinces Bolster Corn and Soybeans by Reserve-Purchases

Top Chinese grain-producing provinces hope to bolster weak domestic corn and soybean markets by purchasing commodities for provincial reserves in March and April. The move signals weak market conditions in China for soybeans and corn despite having cut off nearly all imports of both commodities from the United States since the trade war began last year.

Chinese news media say Heilongjiang provincial authorities issued a "Notice passing down purchase prices for the first 2019 provincial-level reserve purchases of corn and soybeans" that calls for additional purchases of the two commodities that will be added to provincial reserves. The document--issued February 26 by Heilongjiang Province's Grain Bureau, Finance Department, and the provincial branch of the Agricultural Development Bank of China--sets prices of 1600 and 1620 yuan per metric ton for reserve purchases of corn in two zones of the province and soybean purchase prices ranging from 3420 yuan/mt to 3460 yuan/mt across three provincial zones. Purchases are expected to continue through April 30, the customary end of the procurement season. (The document does not appear to be publicly available.)

Jilin Province also launched provincial-level purchases of corn in December 2018, according to an earlier report from Jilin's grain and commodity reserve bureau.  Jilin had purchased 78,500 metric tons by December 25, said to be 37 percent of planned purchase volume. These purchases were described as reversing pessimism about the corn market by stemming a decline in prices.

Heilongjiang Province also plans to double the volume of soybeans purchased for provincial reserves from 100,000 metric tons to 200,000 metric tons, according to another news media report about a meeting on provincial grain purchase work held February 22. According to the report, this year's purchases of soybeans have been markedly slower than a year ago as processors are getting low profits and traders are getting thin margins. Corn purchases in Heilongjiang are slightly slower than last year, while rice purchases are going smoothly. The report said that provincial-level reserve purchases have been launched to address the "contradiction" between supply and demand of fall-harvested grain. Provincial grain bureau officials will coordinate corn and soybean purchases by local grain companies, the report said.