Farm Gate to Fork
News, views, discussion and analysis of farming and food issues along the supply chain.
Could China be Heading for Grain Market Crisis?
China could be heading for a crisis in its grain market with a surplus of corn and imports of other grains apparently rising.
According to official figures from the Central Rural Work Leading Group, China’s grain reserves are about 500 million tonnes.
Of these stockpiles, 42 per cent is corn and in major grain producing areas such as Heilongjiang province the figure could be as high as 50 per cent.
The stocks of corn are expected to reach 200 million tonnes by April – equivalent to China’s total consumption.
Last year, the country imported 30 million tonnes of other grains that are outside the import quotas – these included sorghum, barley and distillers’ grains.
Now the deputy director of the Central Rural Work Leading Group, Chen Xiwen, has called for a cut in corn prices to stop these imports.
He has also called for measures to stop the stocks of corn from rising further in a bid to reduce the corn mountain.
And he said that special measures need to be taken in the north eastern provinces – China’s major corn producing region – to ensure that the corn can compete on the market.
He said China’s current reserve-based crop price support mechanism needs to be changed to meet the growing crisis presented by the growing mountain of corn in storage.
He called for a further lowering of the support price to reduce the reserves while at the same time protecting the farmers, so that they were not hit by the drop in prices.
There is also concern in China that the continued bumper harvests that have caused the growth in stocks can no longer guarantee a growth in income for famers, as the prices are also being hit by the global slump in commodity prices.
In the US, corn exports for 2015/16 are projected to be 50 million bushels lower, reflecting the slow pace of sales and shipments to date and higher projected exports for Brazil and Canada.
US corn ending stocks are forecast to be 25 million bushels higher at 1,785 million bushels and the expected range for the season-average corn farm price is unchanged at $3.35 to $3.95 per bushel, in line with prices reported by the USDA to date and current futures price levels.
However, in China last year, farm incomes rose by 8.9 per cent year on year to 11,422 RMB ($1,743) although the net income was just 5,919 RMB.
These incomes rose alongside a growth in China’s corn production of 2.4 per cent to 621 million tonnes last year. This was the 12 successive rise in production.
While large stockpiles used to be considered good for China, now they are being seen as uneconomical to maintain, particularly because the prices they are being bought in at are above the market rate, which was brought down by rises in imports.
This scenario has only helped to stimulate more domestic production.
All this has led to the call for comprehensive supply-side reforms to lower costs of domestic production and the implementation of measures to protect farmers’ interests while not forcing a dramatic drop in production and stimulating more and more imports.
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