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China Corn Glut No Barrier to Farmers as State Buys

April 8, 2014
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Even after four years of record corn harvests left China with the world’s biggest surplus since 2002, Zhang Fengyou and millions of farmers in the northeast provinces are planting more.

That’s because they know the government will buy corn at above-market prices, stockpiling enough to supply the 28 nations of the European Union for a year. State reserves are a strategic asset for China, the world’s most-populous nation, where corn used to feed hogs, cattle and poultry surged 44 percent over the past five years as meat consumption climbed.

"Nothing compares to corn for giving a stable and good return," said Zhang, 39, who plans to fill his entire 11- hectare (27-acre) farm in Baiwu, Heilongjiang province, with corn this year, a reversal from 2009, when most of the land was used for soybeans.

Rising corn production in China has dashed forecasts that economic growth and increased meat demand would make the nation the largest importer of the grain and send global prices higher. Instead, China’s self-sufficiency eased the strain of climbing world consumption. Futures on the Chicago Board of Trade are down 41 percent from a record in 2012.

Since government subsidies began in 2008, when global food prices tracked by the United Nations jumped to the highest ever, Chinese farmers boosted corn output by 43 percent, collecting a record 217.7 million metric tons in 2013, the U.S. Department of Agriculture estimated in March. Before the harvest starts in September, stockpiles will reach 72.2 million tons, almost twice the 37 million tons held in the U.S. and about as much as the 73.5 million the EU will use this year, USDA data show.

 

Paying More

 

The government paid farmers in Heilongjiang 2,220 yuan a ton ($9.08 a bushel) in 2013, up from 1,480 yuan in 2008, according to the State Administration of Grain website. Price gains were similar in the rest of the northeast, the main growing region, including the provinces of Jilin, Liaoning and Inner Mongolia.

On Zhang’s farm, outside the city of Suihua, about 550 kilometers (340 miles) northwest of Russia’s far eastern port of Vladivostok, last year’s corn crop earned him 10,950 yuan ($1,763) per hectare, twice the 4,000 yuan for soybeans. Zhang said he keeps 30 percent of his harvest to raise 50 pigs.

"China has reaped much more corn than we had realized, and as the government tries to deal with the glut, imports are not seen as necessary," said Li Qiang, chairman at research company Shanghai JC Intelligence Co., who has studied China’s agriculture industry for 30 years. He estimated the country will grow more corn than it uses for at least another two years.

 

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