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China's $4.5 bln in corn subsidies to support output -think-tank

BEIJING, Aug 10 (Reuters) - China's new subsidies for corn
growers in the northern grain belt will encourage farmers to
keep growing the grain, an official think-tank said on
Wednesday, potentially threatening an attempt to bring output
more in line with market demand.

China will allocate 30 billion yuan ($4.51 billion) in
subsidies to corn growers in four provinces next year, said the
finance ministry on Tuesday, to replace a state stockpiling
scheme that was cancelled earlier this year.

The subsidies, described as the first batch, would amount to
around 130 yuan per mu (0.067 hectares) based on current
estimates of corn acreage, said the China National Grains and
Oils Information Center.

"As the subsidy amount is rather big ... farmers' enthusiasm
for selling grain will be quite high," the think-tank said in a
daily report.

The subsidies include 4.58 billion yuan for Liaoning
province, 7.26 billion yuan for Jilin, 11.57 billion yuan for
Heilongjiang, and 6.63 billion yuan for Inner Mongolia.

No subsidies were issued for growers in other provinces.

China, the world's second-biggest corn consumer, said in
March it would scrap a years-long corn stockpiling scheme that
had inflated local prices and left state warehouses chock full
of grain, and instead allow markets to set prices for the
2016/17 crop.

The gap that opened up between local and global prices also
sparked a surge of cheaper imports that exacerbated the domestic
glut. Letting prices fall was aimed at halting the imports as
well as encouraging farmers to grow other crops such as soybeans
to help the government sell down its massive reserves.

While the new subsidy for next year was larger than
expected, it was too early to predict its impact on planting
intentions, cautioned an official at the think-tank.

Some analysts said that while the subsidy appeared large, it
would amount to less than the previous support mechanism.

"If you look at it from the perspective of guaranteeing
farmers' income and the losses that could occur if corn prices
fall, then it's really not big," said Cherry Zhang, analyst at
Shanghai JC Intelligence Co, a consultancy.

($1 = 6.6469 Chinese yuan )

(Reporting by Dominique Patton; Editing by Tom Hogue)

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