China to allow market to set corn prices

China to allow market to set corn prices

The Chinese government has announced an end to corn-growing subsidies.

An end is in sight for Chinese government policy to support domestic corn production, which has subsidized farmers to produce excessive crops that linger in storage.

China’s total corn output in 2015 was 224.6 million metric tonnes (mmt), according to official source – 49 mmt more than demand.

“The price of corn will be completely determined by the market,” said Liu Xiaonan, deputy head of the Economics and Trade Department of the National Development and Reform Commission.

Farmers will still receive subsidies, but the government will pay them to farmers in the major corn-producing regions in northeastern provinces instead of adding the subsidy to the corn price, as in the past.

Reforms to the pricing of other major agricultural products are expected in future, according to Liu.

The new policy follows Premier Li Keqiang’s remarks in the Government Work Report this month that emphasized the importance of improving the price-setting mechanism for grain and other important agricultural products.

Song Hongyuan, head of the Research Center for Rural Economy under the Ministry of Agriculture, said the new policy aims to improve the efficiency of subsidies and address structural problems in Chinese agriculture.

“Without a one-size-fits-all subsidies scheme, regions with fewer advantages in corn production will leave the market and turn to other products that could meet market demand,” Song said.

China’s arable farmers consider planting choices

Falling farmgate prices and changing tastes are forcing Chinese arable farmers to weigh their crop options for the coming season, according to official sources last week.

One farmer said corn does not make money and wheat is risky as it depends on purchases at set prices by local authorities.

The provincial agriculture department in Shandong estimates that farmers in the province have planted 8,333 fewer hectares with wheat this year – the first such reduction in 8 years.

China’s total grain output increased 2.4 percent year-on-year to 621 mmt in 2015 – the 12th consecutive year of growth – but the country had a shortfall of between 20 mmt and 25 mmt last year as the Chinese developed a taste for more diverse grain choices, according to the report. Food imports reached a record 120 mmt last year, with soybean accounting for more than 70 percent of the total. Corn imports increased 80 percent year-on-year, and rice 30 percent.

Large inventories in state stores and competition from imports have depressed grain prices in China, making life difficult for farmers. State inventories in northeast China’s corn production bases already stand at 8.8 mmt.