December 14, 2016 / 6:07 AM / 7 months ago

China's cornbelt province relaxes truck rules to ease grain backlog

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BEIJING (Reuters) - China's northeast Jilin province, the nation's second-largest corn producer, will relax new nationwide restrictions on trucking grains to ease logjams and high costs as the new crop hits the market, the regional government said this week.

The move is among the first official steps to loosen regulations introduced in September that imposed stronger penalties and ramped up inspections to prevent trucks being overloaded with goods.

The document published by the province's transport regulator was posted on the Jilin government's grains bureau that oversees the province's crops on Tuesday.

Corn in China's northeastern corn belt is typically trucked to ports and are then shipped to southern parts of the country.

In a radical departure from the federal rules, Jilin said road regulators will not stop or punish vehicles that are breaking the rules if they are one tonne over the new limit.

Excessive overloading of vehicles carrying grains should still be punished according to the rules, but Jilin said the trucks should not be held for inspection for too long.

Such measures will ease the backlog and likely push regional prices lower, analysts said.

"We will likely see a significant drop of prices of corn at the southern ports by end of this month, as transportation pressure eases," said Meng Jinhui, an analyst with COFCO futures.

Dalian Commodity corn futures for delivery in January have jumped by 13 percent from one-year lows at end-September, in part due to delays in shipments after the new rules came into force.

Trucking prices have also soared and some domestic livestock farmers have sought alternative feed from abroad.

The rail network doesn't have capacity to carry the new crop, which started to hit the market in October, and could create a grains stockpile in Jilin, said the official document.

The provincial government decided to take relevant measures to "secure smooth transportation of grains on the roads, and solve the difficulties farmers have with selling grains," said the document.

The Jilin provincial transportation bureau has asked the road management department to maintain roads in wintertime and set aside special lanes for grains if necessary.

Calls to the Jilin provincial transportation bureau were unanswered.

Any disruption to transporting corn that could create regional gluts in supply would be an extra headache for China's farmers as the government struggles to deal with a massive inventory of corn built up over almost a decade under its stockpiling program.

Beijing abandoned the program this year and is sitting on a hoard estimated to be as big as 240 million tonnes.

Reporting by Hallie Gu and Josephine Mason; Editing by Jacqueline Wong

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