China’s state grains reserves body will auction about 2m tonnes of old corn stocks and 200,000 tonnes of rice on Friday to clear space before the harvest season starts, helping to chip away space in its grossly overstocked grains warehouses.

China’s state reserves of corn, wheat, rice and other agricultural commodities have climbed to high levels thanks to a policy that set state purchasing prices well above market prices in China or overseas. The huge size of the reserves, estimated at 250m tonnes for corn alone, now threatens to swamp markets if sold or run the risk of spoiling from prolonged storage.

The state grains trading centre said it would sell corn grown in northern China in 2012, plus imported corn from 2011 and 2012, to designated buyers, understood to be feed companies and other industrial processors. The choice of buyers indicates that the grain quality has deteriorated so that it is unsuitable for human food.