Where Will the National Temporary Corn Reserve Policy Go?

Since 2008, the national temporary corn storage policy has been in operation for six years now. The national temporary reserve policy was implemented for the purpose of safeguarding national food security and protecting farmers' income, and after this policy was introduced, it genuinely maximized its own value in the early period. When new corn comes onto the market, national temporary-reserve corn purchases provide favorable support for corn prices; conversely, when corn prices keep rising, the corresponding temporary-reserve corn auctions suppress market corn prices to a certain extent. National temporary-reserve corn auctions and purchases have always been a key focus of the corn market. But looking back at the actual effectiveness of the temporary reserve policy in recent years, it has generally not been ideal, and has even brought about an imbalance between supply and demand in the corn market, resulting in overly ample market supply.

⟦NL> In the 2012/13 year, the national temporary reserve purchased more than 30 million tons of corn, and in the 2013/14 year, the national temporary reserve purchased over 70 million tons of corn; market-support purchases caused the national policy-related corn storage volume to rise sharply and dramatically. At the 7th International Corn Industry Conference, Li Jiagui of the Market Monitoring Department of the National Grain and Oils Information Center mentioned in his keynote report "National Temporary Reserve Policy and Its Impact on the Market": "Once the state purchases more than 35 million tons of corn, the market supply-demand equilibrium point has already been broken," while in the 2013/14 year the national temporary-reserve corn purchases doubled; under such circumstances, when new corn comes onto the market, the domestic corn market is bound to face a problem of excess supply and demand.

Although domestic corn this year was affected by drought weather and consecutive days of rain, with corn in various regions more or less affected and facing yield reductions, overall, in terms of output, domestic corn this year can still maintain balance, and the extent of the yield reduction is not as severe as previously imagined. Under the "high inventory" situation, the industry generally believes that the corn market ultimately cannot escape the pattern of "ample supply and demand, supply exceeding demand."

Data shows that since the national temporary-reserve corn auctions that began on May 22 this year went into operation, the total transaction volume of national temporary-reserve corn (including cross-provincial warehouse transfers) reached 25,607,949 tons. In July-August this year, temporary-reserve corn prices kept rising, but from September onward, auctions clearly cooled, transaction prices fell, and transaction rates declined. The auction "low-temperature wave" has continued to this day; in the national temporary-reserve corn (including cross-provincial warehouse transfers) auction transactions that ended on October 9-10, the transaction rate was only 5.77%.

Looking back at previous years, the annual national temporary-reserve corn price has basically "appeared" in mid-November, except for last year when the temporary-reserve corn price was announced early. At the previously concluded National Autumn Grain Purchase Work Conference, relevant leaders pointed out that market-support purchases of corn this year are relatively likely, but did not mention the temporary-reserve corn price. At present, with new grain coming onto the market, corn prices are fluctuating weakly, and future corn purchases and purchase prices will inevitably be the focus of market attention.

"One wave has not yet subsided when another rises." With this year's national temporary-reserve corn purchases still unclear, a grain issue expert in the industry also revealed: the National Development and Reform Commission, the Ministry of Agriculture and other departments are preparing to comprehensively cancel the temporary reserve policy and plan to replace it with a more market-oriented target price subsidy system. Another person familiar with the matter disclosed that the general direction of ending the temporary reserve policies for corn, rapeseed oil and sugar has been set, and corn may become the next pilot variety, to be implemented as early as next year.

The national temporary-reserve corn policy can be described as making people "happy one moment and worried the next," and as for what exactly should be done with the national temporary-reserve corn policy in the future, it may really be a case of "riding a donkey while reading the songbook, and waiting to see"!