Dec. 25 (Bloomberg) -- China, the world’s largest grain grower, may issue fewer 2009 corn export licenses than expected and won’t provide trade incentives as it seeks to control prices and ensure domestic supply, said two traders familiar with the situation.

The government also may decide to delay issuing the licenses, said the traders, who declined to be identified as they are not authorized to speak to the media. Chinese corn prices have risen from a two-year low after the government said it will increase buying of domestic corn to boost farm incomes.

China earlier this month was said to be considering as much as 5 million metric tons in corn export quotas after high output and controls on overseas sales created a domestic glut. Tightening of China’s shipments will help U.S. grain suppliers keep their share of the Asian market.

“Prices have strengthened, and that’s prompted the government to shift back to its priority, which is ensuring sufficient domestic supply,” said Cao Yanhui, manager at Liaoning Cifco Futures Co., by phone from Dalian.

May-delivery corn on the Dalian Commodity Exchange ended 0.2 percent higher at 1,527 yuan ($224) a metric ton. The most active contract is up 6 percent since touching a two-year low of 1,440 yuan on Dec. 12. Corn prices on the Chicago Board of Trade have fallen 50 percent from a June record as slowing global growth trimmed demand for raw materials.

The government this week ordered reserves to boost buying corn from farmers by 20 million tons to a total of 30 million tons, the China National Grain and Oils Information Center said in an e-mailed report today.

‘Staggering Amount’

“That’s a staggering amount, and essentially it allows the government to call the shots in the market” and keep prices where it wants them to be, Chen Baomin, analyst at Jilin Grain Group Co., one of China’s two authorized corn exporters, said by phone from Changchun.

China sells corn mainly to South Korea and Japan, Asia’s biggest buyer of the grain, customs data showed. Exports in the first 11 months this year plunged 95 percent to 235,379 tons after the government in January levied taxes and stopped issuing new export permits.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

Last Updated: December 25, 2008 05:28 EST