(Agrimoney) – China is moving toward an unregulated corn market, a senior official said, in a move that should lower domestic prices and reduce demand for corn-substitutes.
According to the People’s Daily, which is owned by the Chinese Communist Party, deputy director of the Central Rural Work Leading Group Chen Xiwen said that policy direction for the corn market was aimed allowing markets to determine price.
Farmers would no longer be subsidised through supported prices, Mr Xiwen said.
The Central Rural Work Leading Group is the China’s top body overseeing rural affairs.
Mr Chen did not give a timetable for the reforms.
Inventories accumulate
Chinese corn prices stand at more twice international levels, thanks to government support.
The price support is aimed at subsidising farmers, and is part of a stockpiling programme that has seen large inventories of agricultural products accumulating.
China’s combined grain reserves stand at an all-time high of 500m tonnes, with corn levels thought to be more than 200m tonnes.
But the scheme has also created perverse incentives toward imports, even as inventories pile up.
Substitute demand
Chinese quotas mean that feed mills cannot import large quantities of corn or feed wheat.
But sorghum, barley, and dried distillers grains are not subject to the restrictions.
This has sent Chinese imports of corn-substitutes, especially sorghum, booming.
Chinese imports of sorghum hit an all-time high of 10.2m tonnes in the year to September 2015, compared to just 4,000 tonnes four years previously.
Lower corn prices
Earlier this month Mr Chen said that China will need to lower corn prices in order to stop the import of corn substitutes, the People’s Daily said.
China cut the floor price for corn last year, and they are expected to do the same this year.
But there is still no official confirmation on when the support for corn will be pulled altogether.
