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China shores up falling crop prices

China will purchase grains for reserves at prices above current market levels, set up national soybean reserves and buy grains, rapeseed and cotton, in order to help shore up incomes of farmers whose commodity prices are falling sharply.

The moves are in line with a pledge by top policy-makers this month to increase rural incomes. They also serve to put a floor under softening crop prices, so that discouraged farmers continue to plant crops next year.

China will set up a reserve of domestically produced soybeans, the National Development and Reform Commission said Oct. 20, helping most soy futures in Dalian to rise by their daily trading limit.

The reserve could purchase about 1.5 million tonnes of soybeans, traders said.

It will also purchase corn and rapeseed for reserves, as it did last year, the NDRC said without specifying amounts.

China will raise the minimum price paid for wheat purchased by the state reserves system in 2009 by 13 to 15.3 per cent, the NDRC said. The higher minimum price is in line with current market prices, but provides a guarenteed return to farmers still deciding what to plant.

The state reserve system will increase purchases of rapeseed in important growing areas along the Yangtze Valley, and of cotton in Xinjiang, while also aiding the transport of cotton to central and coastal China, the NDRC said.

It will increase subsidies for rice shipments out of the northeast, and buy late paddy rice from the south for reserves.

Farmers growing wheat, paddy rice, corn and soybeans in the northeast will also enjoy greater subsidies, as part of an overall plan to maintain national grains production at over 500 million tonnes a year.

China plans to continue to supply about 95 per cent of the grains it consumes.

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