China will end its state corn stockpiling program this year, replacing it with other subsidies, amid surging reserves in the world’s second-biggest grower, the official Xinhua News Agency reported.
The government will encourage state and private firms to buy corn at market prices and offer credit support to farmers, Xinhua reported late Monday, citing a press briefing by the National Development and Reform Commission. It will also promote changes in crop cultivation and move to reduce existing stockpiles, the news agency said. The changes will affect the 2016-17 season.
China said in January it was assessing changes to its corn purchasing and reserve program to make it more market based. The government began subsidizing output in 2008, acquiring grain at above-market prices to protect farm incomes. That increased domestic production by more than 35 percent and China now grows and consumes more than any nation except the U.S.
“Farmers are wondering what they should plant for this spring, how much they would be subsidized and whether the subsidies are able to cover the losses from falling corn prices,” said Yan Zhang, an analyst at Shanghai JC Intelligence Co.
China to Scrap Corn Stockpiling
Corn for September delivery on the Dalian Commodity Exchange added 0.4 percent to close at 1,575 yuan a metric ton after slumping 3.2 percent on Monday. Prices are down 17 percent this year. The contract for January delivery lost 0.5 percent, sliding for a fifth day.
An official at the State Administration of Grain declined to comment Tuesday on the Xinhua report. A phone call to the National Development and Reform Commission wasn’t answered.
Agriculture Minister Han Changfu said this month that China will seek to reduce acreage planted with corn in less-efficient production areas. The government had already announced a 10 percent cut in the price it pays for corn in September as a way to deplete inventories.
Domestic corn stockpiles are forecast at 111.5 million tons at the end of the 2015-16 season, U.S. Department of Agriculture data show. That’s more than double the reserves held in the U.S. and more than half of world inventories.