China is restricting some corn imports over fears overseas purchases could get out of hand, prompting several feed factories to cancel their US shipments.

Chinese customs officials are restricting imports into free trade zones, which are not counted against an official annual purchase quota, according to people familiar with the matter. The total corn cancellations in the United States are estimated at less than one million tonnes, said two of the people, who asked not to be identified because the case is private.

The crackdown targets companies that have set up blending facilities in free trade zones, according to the population. These facilities allow companies to blend imported corn with other raw materials to produce animal feed that allows them to take advantage of zero-tariff imports, the people said. Out-of-hours calls to Chinese customs went unanswered.

Chicago corn futures slipped as much as 2.8% to a one-month low. Prices are still up around 25% this year.

These canceled shipments are a small amount compared to the more than 20 million tonnes of U.S. corn that China has purchased this season. The Asian nation has been a key source of demand for grain to feed its herd of recovering pigs, helping to push prices to multi-year highs. Imports from the United States have skyrocketed as Beijing also seeks to meet its trade deal commitments.

Beijing’s increased control over its corn imports comes as the larger market focuses on whether the country will continue its increased purchases of raw materials, from grains to metals to fossil fuels. Prices of various commodities have skyrocketed this year in part due to Chinese demand, raising import costs and sparking inflation fears in the Asian country.

In recent weeks, China has stepped up its fight against soaring commodity prices, threatening to punish violations ranging from excessive speculation to spreading false information. While its latest efforts have focused on metals, the government is also seeking to ensure a stable food supply by increasing domestic production and grain imports.

China allocates annual corn import quotas to public and private companies. Crown corporation Cofco Corp. may sometimes receive a stipend to buy an additional amount that it resells in the country to private factories or to replenish state reserves.

The quotas for 2021 are set at 7.2 million tonnes. Imports outside the quota are possible, but may result in tariffs of up to 65% of the purchase price. Shipments to bonded areas are duty free.

The proliferation of companies shipping corn to bonded areas and mixing it for animal feed has alarmed authorities, who seek to control imports and maintain the quality of food products.

Last month, Shandong Province shut down a feed producer in a bonded zone after its product failed to meet protein requirements. The plant was mainly blending corn with a small amount of dried distillery grain, one of the people said.

All of the cancellations will be for the old US corn crop from MY 2020-2021, the people said. More than 15 million tonnes of U.S. corn have been purchased for public stocks of old and new crops, two people said.

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