China is buying at least 1.5 million metric tons of soybeans from local farmers, boosting rural incomes after much of the main producing region's harvest went unsold, two executives at state-owned companies said.

 

While the state reserve has already procured about 500,000 tons, other buyers and local crushers have imported cheaper soybeans, said the executives, who declined to be named as reserve actions are considered a state secret. The 1.5 million tons, worth 5.6 billion yuan ($820 million), represents about 9 percent of the domestic crop.

 

Further purchases may boost China's imports as the reserve absorbs domestic supply. China said Oct. 20 it would buy local soybeans to help farmers prevent losses after prices plunged. Dalian futures have dropped 39 percent from a record on July 3. The government didn't publicly announce its target volume.

 

``They should support prices'' so as to prevent reductions in planting acreages next year, said Dorab Mistry, a London-based vegetable oils trader for Godrej International Ltd., who recently spoke to Chinese officials.

 

The government would pay 3,700 yuan a ton for soybeans and 1,500 yuan for corn in northeastern China, the National Development and Reform Commission said in a statement on its Web site Oct. 20.

 

Dalian Prices

 

Soybeans for May delivery on the Dalian Commodity Exchange fell 59 yuan, or 1.8 percent, to 3,205 yuan a ton at 9:27 a.m. local time. Futures have dropped from a record 5,241 yuan.

 

Prices of soybeans exported to northeastern China, the biggest producing region, are as low as 3,100 yuan a ton, compared with locally produced beans at about 3,850 yuan a ton, said Nie Ben, manager at Shanghai Continent Futures Co. in Dalian.

 

Officials are also considering raising the import tax on soybeans from the current 3 percent to reduce the appeal of overseas supplies, the executives said.

 

State purchases of soybeans at above-market prices are necessary to stem an income disparity between rural and urban areas and prevent social unrest by aiding the farmers during harvesting and selling of the new crops, trading executives said last month.

 

China's output may rise 30 percent to 16.5 million tons this year from 12.7 million a year earlier, the China National Grain and Oils Information Center said Nov. 12 in a report.