China to "focus" 2018 efforts on corn destocking: Ag. Ministry

China’s efforts to reduce its huge stockpile of corn need greater focus in 2018, the country’s director of market and economic information at the ministry of agriculture said during a press conference on Wednesday, indicating China will proceed with its policy of cutting subsidies for corn farmers.

Describing efforts to tackle burgeoning stocks undertaken in 2017 as “exceeding expectations”, Tang Ke singled out corn destocking as the second of four main priorities for China’s agriculture sector

The others include gauging the impact of recent cuts in minimum prices for rice and wheat, the global oversupply of cereals and the import pressure of other foods, including fruit and vegetables.

Controlling corn plantings appears to continue to be the primary tactic to get to grips with stocks, cutting production in “non-dominant”, harder-to-farm areas and ensuring that farmers comply despite domestic corn prices ticking higher.

“Farmers should not blindly expand the corn planting to avoid increasing production without increasing income,” Tang Ke warned.

China announced in 2016 it would end a nine-year old corn price support programme in a bid to reduce its huge stockpiles.

According to data from the USDA, planted area for corn grew 60% from 2001 through 2017 to almost 36 million hectares, as state subsidies encouraged farmers to plant the seed.

The government now is now targeting to reduce that area by 3.3 million hectares or 9% by 2020.

Citing firmer domestic prices as evidence that the reforms were starting to bear fruit, the press release hints at the challenge of curtailing farmers’ incentive to plant corn while also stabilising and increasing corn prices.

In the fourth week of December 2017, corn prices in Northeast China had risen 7.3% over the fourth week of October and were 16.8% higher than the same period of 2016, with temporary storage of corn decreased “significantly.”

Bull in a China store

Efforts to curb China’s stocks have been seen as potentially supportive for corn prices, which have languished globally in recent years as bumper harvests among key producers have seen stock levels surge and underlying competition between producers increase.

The USDA’s monthly WASDE report puts China’s corn stocks at 100.71 million mt, with the January report seeing a modest 10,000 mt downwards revision in light of China’s recent efforts, and global corn stocks at 228.75 million mt, up nearly 1.5 million mt.

However, seasoned industry commentators informally put China’s corn stocks at over 200 million mt alone and the International Grain Council’s increased its corn ending stocks from 206 million mt in November to 322 million mt in January 2018 largely on the back of revisions to China's stockpile.

China's government has indicated that it intends to roll out a nationwide ethanol mandate by 2020 as an outlet for corn stocks.