• Condensed by Lynda Kiernan

Faced with Massive Corn Stocks, China to Subsidize Soy Production

Corn output in China for the 2016 season is predicted to fall by 2.3 percent as acreage retracts by almost 5 percent to 36.3 million hectares, according to the official think tank, China National Grain and Oils Information Center reports Reuters. Despite lower output and acreage, yields are expected to increase to six tons per hectare – an increase of 162 kilograms over last year’s yields. Meanwhile, domestic consumption is also expected to jump by 12 percent in 2016/17 to 199 million tons, with demand from the animal feed sector, accounting for 60 percent of demand and industrial uses accounting for the balance.

The decline in output is likely the result of a shift in China’s domestic policy eliminating subsidies and stockpiling that led to production that far outstripped demand. However, even with lower prices, less acreage and slowly declining output, analysts claim that it will take years for the country to reduce its corn inventories.

Shifting Focus to Soybeans

The government of the top grain producing province in China is offering farmers 150 yuan (US$22.46) per mu (0.067 hectares, .165 acre) to rotate in the production of soybeans as the country continues to attempt to decrease its massive overstock of corn.

Under the country’s new grain policy, Heilongjiang province will enact the subsidy payments on a trial basis for between three to five years. In total, approximately 6.5 million mu (433,000 hectares, 1.07 million acres) of corn are expected to be shifted into soybean production as a result of the program, according to the China National Grains and Oils Center.

Taking the new incentive into consideration in combination with low corn prices and a separate subsidy of 4,800 yuan per ton for soybean growers, the China National Gains and Oils Center concludes that soybean acreage in the province will likely see a significant increase next year, although the group did not specify an exact figure.

Longer term, China is targeting a 37 percent increase in soybean acreage by 2020 and an increase in output from 12.5 million tons this year to 18.9 million tons over the same time period, according to the National Development and Reform Commission. Although higher, this output will still fall far below the country’s demand, as it is expected to import 86 million tons of soybeans next year.

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Lynda Kiernan is Editor with HighQuest Group Media and of the Oilseed & Grain News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@highquestgroup.com.

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