Corn stocks exceed 200 million tons, and the corn purchase and storage mechanism will undergo major changes
Reporters from Economic Information Daily recently interviewed several experts and learned that China's state corn reserves have accounted for more than half of the global total, with huge stockpiles waiting to be consumed. In order to cope with the nearly astronomical carryover corn stocks, China will reform and improve its corn purchase and storage policy before 2020.
China's carryover corn stocks have remained at a high level. According to estimates, as of now China's temporary storage corn surplus is at the level of 150 million tons. As areas planted with soybeans, cotton, and miscellaneous grains shift increasingly clearly to corn, the China National Grain and Oils Information Center predicts that China's new-season corn output is expected to reach 232 million tons, setting another historical high. However, the auction situation at the National Grain Trade Center this year shows that the cumulative auctioned and sold corn volume so far this year is only 5.86 million tons, far below the market expectation of 20-30 million tons. If beginning inventories are taken into account, China's corn surplus is expected to reach more than 200 million tons for the first time.
Li Xirong, head of the National Animal Husbandry Station and executive vice president and secretary-general of the China Feed Industry Association, said at the 8th International Corn Industry Conference that after entering the new century, China's corn development accelerated, mainly due to improved planting technology and climate warming. Another important factor is policy——direct grain subsidies and temporary storage for corn have kept corn planting area rising continuously.
Zhu Yongsheng, assistant general manager of the Biochemical Business Division of COFCO Group, said that China's temporary storage corn price has only risen and never fallen. Over the past 20 years, China's corn price started at 600 yuan/ton and repeatedly hit new highs. At present, the corn price in Changchun is around 2,300 yuan/ton. While this stimulated a large increase in output, it also suppressed domestic corn demand. Data from the Ministry of Agriculture show that China's live hog inventory and breeding sow inventory both hit new lows in recent years, further indicating the current poor demand for corn.
While the temporary storage corn price remains high, China's total corn imports have maintained a trend of substantial year-by-year increases and, with low prices, have posed a strong challenge to domestically produced corn. According to estimates, the current duty-paid price of U.S. corn arriving at Chinese ports is about 1,600 yuan/ton. Calculated at a spot price of about 2,500 yuan/ton at southern ports, the theoretical profit on corn imports is about 900 yuan/ton. Therefore, in recent years China's imports of corn and substitutes such as corn, sorghum, barley, cassava, and cassava starch have shown rapid growth. According to incomplete statistics, in the previous year China imported a total of 28.5 million tons of the above categories of goods, and this year the volume is expected to exceed 30 million tons.
Zhang Meifeng of the Futures Investment Department of Tiancheng Corn Development Co., Ltd. said that for imports of grains such as sorghum, barley, and cassava, China currently has no strict quota management system. In addition, these trades mainly rely on foreign quotations or agent services and other links to ensure that enterprises complete a series of import procedures, making the difficulty of participating in international trade not high. These factors have caused their import volumes to show an expanding trend.
Multiple experts unanimously believe that how China's corn purchase and sales policy will be adjusted this year or in the future is a major issue facing the government.
Wang Xiaohui, deputy director of the China National Grain and Oils Information Center, said that corn is a variety with large demand, a long industrial chain, and a high degree of linkage with domestic and international markets. The adjustment of the temporary storage policy must adhere to two directions. First, adhere to the principle of market pricing and let the market play a decisive role in the resource allocation process; second, advance the separation of agricultural product price and subsidy.