Corn stocks surge sharply, Ministry of Agriculture says structure needs adjustment and optimization

At present, grain supply and demand at home and abroad are generally loose, international grain prices are running at a low level, and the price gap between domestic and international grain remains relatively large.

On November 19, at the “Press Briefing on Current Grain-Related Policies” jointly held by the National Development and Reform Commission, the Ministry of Agriculture, the Ministry of Finance, the State Administration of Grain, the Agricultural Development Bank of China, and Sinograin, a relevant official of the State Administration of Grain said that domestic grain prices faced considerable downward pressure.

⟦NL> Support-price procurement stabilizes market expectations and grain prices steady

According to monitoring, in mid-November 2015, the domestic-international price gaps for wheat, corn and rice were around 700 yuan, 630 yuan and 760 yuan per tonne respectively.

The reason grain prices continue to decline is that China's grain production has had bumper harvests for many consecutive years, while consumption growth has slowed markedly. Although total supply and demand are basically balanced, the structural contradiction among varieties is prominent: rice supply exceeds demand, corn is in a phased surplus, and imports of corn substitutes such as sorghum and barley have increased substantially.

To this end, the state has guided market expectations toward stability by promptly launching procurement and storage measures and other steps. At present, the domestic grain market and prices are tending toward stability.

The 2015 minimum purchase price procurement of wheat ended at the end of September. In early October, wheat market prices briefly fell for a time. On October 10, the state announced the 2016 minimum purchase price for wheat, making clear that the 2016 minimum purchase price level for wheat would remain unchanged from the 2015 level, which stabilized market expectations and led wheat prices to steady and rebound.

This year, mid- and late-season rice has already come onto the market in large volumes. Because market prices in most production areas were below the minimum purchase price at the early stage of market arrival, Anhui and 9 other provinces promptly launched the emergency plan for implementing the minimum purchase price for mid- and late-season rice. At present, mid- and late-season rice market prices are basically stable at the minimum purchase price level.

Affected by supply and demand relationships and the macroeconomic situation, the corn market has continued to weaken since the beginning of this year, especially with relatively large price declines in September and October. As comprehensive temporary storage procurement of corn was launched on November 1, corn market prices in Northeast China have rebounded and stabilized, and corn market prices in North China have also shown a recovery increase.

Another grain bumper harvest, greater efforts to advance structural adjustment

On the day of the press briefing, Pan Wenbo, deputy director of the Department of Crop Production of the Ministry of Agriculture, said that this year was another bumper harvest year for grain and continued to be a highlight of economic and social development. At present, autumn and winter planting is nearing completion, and according to the Ministry of Agriculture's scheduling, progress is smooth and the foundation is relatively good.

Among this, the wheat area increased slightly while remaining stable. It is expected that this year's autumn and winter grain area will increase by 1.3 million mu, including an increase of more than 600,000 mu in winter wheat and 800,000 mu in potatoes. In addition, structural adjustment continued to advance. Affected by policy adjustments and declining planting returns, cotton area continued to be reduced this year in areas such as the Huang-Huai-Hai and Yangtze River basins, and rapeseed area was reduced in the middle and lower reaches of the Yangtze River. Third, seedling conditions and growth are relatively good.

Pan Wenbo said that what is most worrying at present is that the El Nino phenomenon that occurred since May 2014 has continued to develop and has now strengthened into the strongest El Nino phenomenon since the beginning of the new century. The probability of a warm winter this year has increased, and winter drought and excessive growth may occur.

In recent years, affected by factors such as slower growth in domestic and international consumer demand and the impact of imports of substitute products, corn currently exceeds demand, and stocks have increased substantially, becoming a prominent problem in the current development of grain and agricultural production. Ensuring the effective supply of grain and other agricultural products is the fundamental task of agriculture, and adjusting and optimizing the agricultural structure is also an important task for agriculture.

On how to advance agricultural structural adjustment, the Ministry of Agriculture issued the “Opinions on Further Adjusting and Optimizing the Agricultural Structure” at the beginning of the year. Recently, it formulated guiding opinions on corn structural adjustment in the “Sickle Bend” region. The “Sickle Bend” region includes non-advantageous corn production areas such as the cold Northeast region, the northern agro-pastoral ecotone, the windy and sandy arid region of the Northwest, the area along the Taihang Mountains, and the rocky desertification area of the Southwest. Pan Wenbo said that the Ministry of Agriculture is currently considering some ideas and targets for crop production structural adjustment during the “13th Five-Year Plan” period.

In addition, pilot demonstrations were also carried out. This year, 300 million yuan was allocated to select 30 counties in the “Three Norths” region to carry out “grain-to-forage” pilots and promote the integration of agriculture and animal husbandry. At the same time, special funds were allocated to carry out grain-soybean rotation pilots in areas of the fourth and fifth accumulated temperature zones such as Bei'an City in Heilongjiang Province, exploring planting models that combine land use with land nurturing.

Third, provide good guidance services, strengthen policy publicity, and guide farmers to rationally arrange their planting structure.

Pan Wenbo said that, overall, localities are proactive in advancing planting structure adjustment and the results are obvious. For example, in Northeast China, where corn stock pressure is relatively great, corn area in high-latitude and arid areas was reduced by 3 million mu this year, with cold-tolerant crops such as soybeans, miscellaneous grains and tubers planted instead. In the “Three Norths” agro-pastoral ecotone, following the approach of determining planting by raising livestock and combining agriculture with animal husbandry, grain corn was reduced and forage crops such as silage corn and alfalfa were planted instead, actively developing herbivorous animal husbandry.

Next, the Ministry of Agriculture will vigorously advance corn structural adjustment in the “Sickle Bend” region. He said the key measures are: first, properly align tasks. Next year, corn area in the “Sickle Bend” region, especially Northeast China, will be reduced by more than 10 million mu, with tasks implemented province by province and substitute crops well chosen to ensure structural adjustment advances forcefully and in an orderly manner; second, seek policy support, with the focus on securing subsidies for “grain-to-forage” and subsidies for building a reasonable rotation system, guiding farmers to adopt reasonable rotation planting models, improve soil structure, enhance soil fertility, and achieve the combination of using and nurturing the land. Third, strengthen guidance services, organize experts to formulate technical plans for corn structural adjustment in the “Sickle Bend” region, strengthen classified guidance, carry out guidance services, and implement various technical measures for structural adjustment according to local conditions.