China Sets Export Quota Limit

Country will allow only 500,000 metric tons of corn to be exported next year; traders debate impact.

The world's second largest corn producer announced an export quota this week of 500,000 metric tons, which is about 10% of levels seen in previous years. The country's government is hard at work building domestic stores of grain to avoid worries of food shortages.

The country had apparently been considering allowing as much as 5 million metric tons to be exported, according to a Bloomberg report. But China had been expected to issue fewer permits to control prices and ensure those domestic supplies. The 500,000-ton quota is less than 1% of world corn trade and unlikely to erode U.S. sales into the Asian market according to reports.

Analysts quoted by Dow Jones this week say the 2009 quota won't help ease the country's domestic supply pressure because global prices have fallen. The report also says China will issue a similar quota for wheat exports. Domestic prices for corn in China are higher than world prices as the government works to support farmers.

The new quota is low compared to China's large 2008 harvest.

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