China Eliminates Domestic Grain Price Controls

The People’s Daily, China’s Communist party newspaper announced on January 26 that Beijing will eliminate its grain price support, allowing for global supply and demand to dictate grain prices going into 2016, according to World Grain.

A definitive date has not been announced for the shift according to QT AG Online, but once in place, the Chinese government will no longer be controlling the country’s corn market, buying grain from its farmers at inflated prices, which resulted in massive carryover stocks.

Deputy Director of the Communist party’s Central Rural Work Leading Group, Chen Xiwen, who has been tasked with directing the policy shift, stated that “the market should decide on the price.” To compensate the country’s grain farmers, the government plans to divide subsidies from the price of grain – issuing separate cash payments to growers instead of artificially inflating domestic prices.

The policy shift has been initiated with four goals in focus, noted Xiwen – limiting grain imports, avoiding an increase in domestic grain inventories, to stimulate the market, and to ensure a suitable return to farmers.

The move is also being seen by Bryan Lohmar, the Director of the United States Grain Council in China, as a means to slow demand for barley and sorghum – two feed ingredients that have been gaining market share in China because they are not subject to quotas or restrictions, reports QT AT Online.

“China, of course, its rising demand for meat is raising demand of feed grain. Its restrictions on imports of corn has caused the feed industry to turn to US sorghum,” said Lohmar.

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