Grain markets continue gains

China announced an export tax of 5% on corn and soybeans and a 20% for wheat. China is also selling from its grain stockpiles through local auctions. All of this is an effort to slow its rapid food inflation. Inflation is a problem in China and will lead to political issues if the price increases are not curtailed.

While China is a not a great exporter of grains, this policy does place more pressure on the rest of the export market. For the 2007 marketing year, China was a net exporter of 1400 (1000 MT) of corn and 2800 (1000 MT) of wheat. They were net importers of soybean meal and oil. The export tax will not have as much of an effect on prices as the selling from inventories. Global grain inventories have reached extreme lows this year, so anything that will further curtail this buffer stock will cause price increases.

The Chinese polices caused a further increase in grain prices to start the year.