Divergence between domestic and international corn prices forces adjustment of the temporary corn storage policy
Today, the domestic corn market has clearly shown a “three highs” pattern, that is, the highest output, the highest inventory, and the highest price market, and the domestic corn price has diverged severely from the international market corn price.
Liu Hanyuan, Chairman of the Board of Tongwei Group, said yesterday at the “7th China International Corn Industry Conference” that under the new situation, the biggest challenge facing feed and breeding enterprises lies in the direction of government policy, and the biggest risk also lies in the direction of policy.
In 2008, domestic and international corn prices fell sharply. In order to protect farmers' interests, the government implemented a temporary purchase and storage policy in the corn market. “Although this was a temporary policy, by now it has been implemented for quite a long time.” Liu Hanyuan said that today, the domestic corn market has clearly shown a “three highs” pattern, that is, the highest output, the highest inventory, and the highest price market, and the domestic corn price has diverged severely from the international market corn price.
As the corn market shows the “three highs,” how can the surplus corn be disposed of?
“It obviously cannot be sold on the international market.” He said that in 2000, China sold part of its corn on the international market, with a subsidy of 300—400 yuan per ton, and some even 600 yuan. At the current quality and price of domestic corn, even with a subsidy of half that amount, it cannot be sold.
On the other hand, he also mentioned that internal digestion faces the highest raw material prices, the highest labor costs, and relatively low production efficiency.
It is also understood that China's corn starch exports have basically stopped, and because production costs are too high, there is not much opportunity for alcohol exports either.
Liu Hanyuan believes that the rising input costs of the feed and breeding industries have caused their products to lose competitiveness in the international market, and combined with the severe divergence between domestic and international corn market prices, these factors are forcing adjustment of the temporary purchase and storage policy. Although the government has always adopted various technical barriers to restrict corn imports, as time accumulates, when the policy is finally adjusted, domestic corn and its downstream industries will suffer relatively large losses, and the disruption will also be very strong. Feed and breeding enterprises will face great risks and challenges. Regarding the development of feed and breeding enterprises, Liu Hanyuan believes that for enterprises to operate stably, they must transform their development model and management concepts. At present, the feed and breeding industries have excess capacity. When market conditions are very good, the overall capacity utilization rate is less than 60%. When market conditions are poor, the capacity utilization rate is less than 50%. Under such circumstances, enterprises must clearly understand the situation and the characteristics of the market transition period, and engage in rational thinking. They cannot simply expand capacity again. They must find differentiated advantages and grasp an appropriate, or even slightly slower, pace of development.
⟦NL> “For an enterprise to develop, it must do a good job in upgrading and replacing. While making investment more rational, enterprises must grasp the needs of the times for rising quality, and establish their own advantages in service, product quality, and brand building.” Liu Hanyuan believes.