China may need to introduce rebates to boost grain shipments and ease a glut of wheat, rice and corn as a cut in export taxes announced last week won't be sufficient to have an impact, a commodity researcher said.

 

Exports won't rise without further incentives because global prices of grains such as wheat and corn are significantly lower than in China, Tommy Xiao, director of research at Shanghai JC Intelligence Co., said in an interview today.

 

China eliminated or cut export taxes on major grains and flour, effective Dec. 1, after bigger harvests increased food security and created a domestic glut. The government is encouraging exports to stem a price slump that is hurting farm incomes and threatening next year's planting intentions.

 

The new policies ``are not having much effect,'' Xiao said by phone from Shanghai. ``The intention is clear that the government sees food supply as secure and wants prices to strengthen and raise farmers' interest in growing crops.''

 

U.S. wheat prices are more than 30 percent cheaper than China's domestic wheat prices and similar differentials exist for corn, according to Ma Wenfeng, analyst at Beijing Orient Agribusiness Consultant Ltd.

 

Corn for May delivery on the Dalian Commodity Exchange closed at 1,597 yuan ($234) a metric ton today, up 15 yuan, or 0.9 percent, since the government announced the export tax changes on Nov. 13.

 

Soybean futures in Dalian have also edged up 0.9 percent since Nov. 13, closing at 3,231 yuan a ton today, while wheat traded in Zhengzhou settled at 1,985 yuan a ton, up 3.5 percent since the changes were announced.

 

Measures `Insufficient'

 

``It's been a terrible time for exporters,'' Xiao said. ``The market sees the new measures as insufficient and expects more meaningful measures to come out, but these policies are hard to predict.''

 

China's corn exports in the first 10 months fell 96 percent from a year ago to 210,000 tons, while rice exports fell 10 percent to 880,000 tons, according to customs data.

 

China raised export taxes and eliminated subsidies for overseas sales on Jan. 1 this year to boost domestic grain supply on concerns that speculation about a global food shortage may fan domestic prices and undermine social security. In reality, the country's supply of wheat, rice and corn has been in surplus for at least the past two years, according to Xiao.

 

Prices of sugar and cotton in China have also declined after domestic production surged, while the financial crisis has eroded demand for processed foods and textiles, he said.

 

``Agricultural prices will have to fall lower'' with the economy poised to slump further, Xiao said.