This year's corn procurement and storage price is cut by 220 to 260 yuan per tonne

Last weekend, the National Development and Reform Commission, the State Administration of Grain, the Ministry of Finance and other departments jointly issued the "Notice on Issues Concerning the National Temporary Storage and Purchase of Corn in Northeast China in 2015" (hereinafter referred to as the Notice). The Notice states that, with the approval of the State Council, this year the state will continue to implement the temporary corn storage and purchase policy in the three northeastern provinces and the Inner Mongolia Autonomous Region.

A reporter from Futures Daily compared the corn procurement and storage policies published by the government this year with those of 2013 and 2014 and found that this year's corn procurement and storage policy has seen major changes in the purchasing entities, the purchase price and the purchase period, and that it also lays out detailed provisions on how to control the quality of corn going into storage and how to handle corn that fails to meet the standards.

First, the entities purchasing and storing corn have been expanded again this year. In 2013, the only purchasing and storage entity was China Grain Reserves Corporation. In 2014, the purchasing and storage entities included China Grain Reserves Corporation, COFCO Corporation and Chinatex Corporation, but the purchasing and storage scale of COFCO Corporation and Chinatex Corporation was divided at 5 million tonnes and 1 million tonnes respectively. This year, the purchasing and storage entities are China Grain Reserves Corporation, COFCO Corporation, Chinatex Corporation and AVIC International Holding Corporation. Among them, the purchasing and storage scale of COFCO Corporation, Chinatex Corporation and AVIC International Holding Corporation is allocated according to the enterprises' warehouse capacity and management capability.

Second, this year's corn procurement and storage price has been substantially lowered, with cuts of 220—260 yuan/tonne across the producing areas. The corn procurement and storage prices in 2013 and 2014 were the same: the listed purchase price for national temporary storage corn (national standard third-class quality standard) was 2260 yuan/tonne in Inner Mongolia and Liaoning, 2240 yuan/tonne in Jilin, and 2220 yuan/tonne in Heilongjiang, while this year the purchase price in all producing areas is uniformly 2000 yuan/tonne.

Third, this year's corn purchase period is relatively long. The documents on the procurement and storage policy were formulated on November 22 and November 25 in 2013 and 2014 respectively, and on September 17 this year, while the implementation period of the procurement and storage policy was in all cases from November 1 of that year to April 30 of the following year. By comparison, this year's corn procurement and storage period is relatively much longer.

Fourth, this year's procurement and storage policy also sets out specific requirements on how to handle corn that does not meet the quality standards, whereas there were no such requirements in 2013 and 2014. This year, corn that fails to meet the quality standards is to be purchased by local governments in an organised manner in accordance with the provincial governor responsibility system for food security and the local responsibility system for food safety, and among the imperfect grains, those with mouldy kernels exceeding 2% must be used for the prescribed purposes. The related expenditures are to be coordinated and arranged by local governments, and any shortfall may be covered from the grain risk fund.

“This year's corn procurement and storage policy was announced ahead of time, and the purchase price has been cut by a relatively large margin, which is consistent with our country's corn production situation this year and the current development trend of market prices.” Qiang Sheng, a grain trader in Nanjing, told a reporter from Futures Daily that the adjusted corn procurement and storage policy has changed compared with previous years, that this year it is closer to market reality, and that it will have an important impact on our country's corn planting, circulation and prices. It is particularly worth noting that the policy adjustment will also affect imports of corn, DDGS, sorghum and barley, and will ultimately also promote the adjustment of our country's crop planting structure.

In recent years, our country's corn planting area has grown relatively fast. Because it requires less labour, has low material input and brings high returns, much land in the Northeast and other regions that is not suitable for growing corn has also been planted with corn. This has caused an imbalance in the crop planting structure in some regions and also an imbalance in the varieties supplied to the market; it is not conducive to increasing farmers' income and improving their ability to withstand market risks, nor to the long-term sound development of our country's agricultural industry. The government's adjustment of this year's corn procurement and storage policy is conducive to guiding farmers to change their planting structure, and more importantly, it is conducive to allowing the corn market mechanism to play its role, weakening the policy's impact on the market, and weakening the impact of imported corn on the domestic market and related industries.