MySheen

China's corn harvest and storage policy will be implemented for another year.

Published: 2024-11-24 Author: mysheen
Last Updated: 2024/11/24, China will implement a corn harvest and storage policy for another year before fully liberalizing domestic corn prices, according to industry analysts. The collection and storage policy is designed to increase rural incomes, but some market participants also point out that this policy has led to high domestic corn prices. At present, Chinese corn

Industry analysts say China will implement a corn stockpiling policy for another year before fully liberalizing domestic corn prices.

The policy aims to boost rural incomes, but some market participants say it has led to high domestic corn prices. Corn prices in China are currently about 50% higher than international market prices, forcing domestic feed manufacturers to replace domestic corn with imported corn or cheaper alternatives. Market participants had expected the government to cancel corn stocks as early as this year. Li Qiang, chief analyst at Shanghai Huiyi, said domestic corn prices will ultimately depend on market factors and market prices related to international market prices, which could occur as early as 2017.

China's development and reform commission and ministry of agriculture said last month that the market would play a decisive role in domestic corn prices, signaling a change in the government's current purchasing policy.

Analysts said that while the stockpiling program would continue in 2015/16, the number of acquisitions would be reduced and the price of corn stockpiling could fall as the government sought to balance the interests of farmers and downstream processors. Analysts said the ministry of finance and the national development and reform commission believe the corn support price should be 1800 yuan per ton, or $296.75 per ton.

But analysts say the ministry opposes a sharp cut in the minimum purchase price for corn because it could adversely affect the main corn producing areas in northeast China. Northeast China accounts for about 40% of China's corn production. COFCO futures analysts said the market generally expected the new season corn purchase price will be lowered, but for the extent of the reduction, market forecasts are divided.

Analysts said the lower purchase price would make domestic corn more competitive and help loss-making downstream industries recover. The government also plans to reduce the number of acquisitions by imposing stricter quality standards, they said. Huiyi analysts said the price cut could lead to imports of corn and corn substitutes falling by more than 30 per cent to 20 million tonnes next year, down from 30 million tonnes this year.

China's imports of corn and corn substitutes in 2015/16 have reached record levels as prices are cheaper overseas. Corn substitutes include sorghum, corn dregs and barley, which are coarse grains that are not subject to quota restrictions.

As the market expects that the corn purchase price may be lowered, the corn period of January 2016 of Dalian Commodity Exchange is under pressure. At present, the price of this period is about 2000 yuan per ton, which is lower than the current spot price of 2350 yuan/ton.

 
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