In policy shift, China to store less corn

Updated: 2016-04-07 11:26

By Paul Welitzkin in New York(China Daily USA)

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It's not clear yet if China's shift in corn policy will affect the global corn market, although some believe it may result in fewer imports of corn substitutes such as barley and sorghum to the country.

China said last month it will move away from stockpiling corn and start selling its huge inventory in a bid to improve agricultural efficiency.

"We hope the new reform will let the market play more of a role in the formation of prices," Liu Xiaonan, deputy director of the National Development and Reform Commission, told Reuters.

Fred Gale, an agricultural economist at the US Department of Agriculture, said the change is part of a general shift toward a policy in which the government allows prices to be set by market forces.

"Instead of manipulating prices to support farmers, the government will give them subsidy payments and overhaul the agricultural sector to make it more efficient," Gale wrote in an e-mail.

Gale said a massive surplus of corn in China has forced the government to stockpile large amounts of the last four corn crops.

"Because China's corn prices are so much higher than world prices and demand for corn is down, feed mills have been importing cheaper substitutes for corn. There is not enough space to store the grain," he said.

The effects on the global market are indirect according to Gale. "China can't subsidize corn exports and it limits imports of corn with a quota, so it's insulated from the world market to some degree," he added.

Gale said China receives most of its corn imports from the Ukraine (3.9 million metric tons in 2015). "China has already cut back on imports of corn from the United States," he said.

Last year the US exported 550,000 metric tons of corn to China out of total exports of more than 44 million metric tons.

Gale said the policy change may mean a decline in imports from the Ukraine. Indirect effects will be a decline in China's import of corn substitutes such as sorghum, barley, distillers grains and cassava.

"Last year, the combined total of China's imports of these was about 38 million metric tons. As Chinese corn prices fall, imports of these commodities will fall too," noted Gale.