Massive corn stocks prompt China to subsidise consumption

31.10.2016

China's grain-belt provinces unveiled hefty support for corn consumption, as the government grapples with its massive stockpiles.

Three major corn producing states will provide support for corn use, which is likely to increase domestic ethanol production, which has long languished due to China's high domestic corn price.

China's top corn province Heilongjiang, will provide an unspecified subsidy for consumption.

And Jilin and Liaoning, which are also in the county's northeaster corn-belt, will offer 200 yuan per tonne of corn consumed.

The move is intended to support demand for corn, after China abandoned a stockpiling policy which supported prices and drove production higher.

Corn glut

The Chinese government has traditionally been suspicious of industrial corn use, particularly for biofuels, as it threatens to undermine the country's food self-sufficiency.

But China is now struggling with a glut of corn, after years of surplus production, thanks to a price floor system which saw the government acquire huge stocks.

This week the International Grains Council said Chinese grain stockpiles could reach 200m tonnes by the end of the year, some 40% of the world's total inventories.

Ethanol imports slide

In the long term China intends to cut production, with the government targeting a reduction of corn planted area by 0.7% a year over the next five years.

But the government is also striving to support farmer incomes, with direct farmer support.

Although the moves may support Chinese industrial corn usage, the policy is targeted at increasing consumption of domestic stockpiles, and the government continues to restrict imports of overseas supplies.

But higher industrial use will hit Chinese ethanol imports, which are also sliding.

The latest trade data, released this week, shows Chinese ethanol production in September at their lowest level since early 2015, with imports of dried distillers grains also sharply down.


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