Stuck with a six-month supply of corn in the warehouse, China “has pledged to end a costly corn stockpiling policy that has hit world markets,” says the Financial Times. “State-owned stocks ballooned in only a couple of years because the government purchase price was up to 50 percent above the market price. In a switch, the State Administration of Grain said it will pay subsidies to growers when prices fall and will encourage state-owned companies to buy corn at market prices.
Beijing still faces the dilemma of how to draw down stockpiles that amount to half of the corn “carry-over” in the world without depressing domestic prices or prompting farmers to plant too little corn to supply the country in the near term. The Financial Times said China “has failed to significantly reduce its cotton stockpile in two years of endeavors because it set the price too high. China holds a one-year supply of cotton in reserve and has two-thirds of the global surplus.
“China said it would lower state-set corn prices in September but that still left Chinese prices some way above world prices,” said the FT. Corn for May delivery sells for $6.61 a bushel, nearly $3 higher than the futures price in Chicago. The Finance Ministry budget released earlier this month was silent on the details of the new subsidies for corn growers.
“State granaries’ large inventories and competition from imports have depressed grain prices in China, making life difficult for farmers,” said Chinese news agency Xinhua. It cited a statement by Agriculture Minister Han Changfu that China would switch its approach from seeking continuous growth in grain production to ensuring that farmers grow grains that are in demand.