At an April 26 press conference, the head of China's Grain Bureau acknowledged that the country's grain reserves are at a record high. Normally, plentiful grain supplies is a good thing, but not when there's no place to store it. The Grain Bureau chief warned that one-sixth of the grain is stored in rudimentary facilities where it is vulnerable to safety hazards.
The Ministry of Agriculture has released a plan for structural adjustment of crops by 2020 that acknowledges great difficulties and "hard constraints" of natural resource limits, yet the plan aims to keep area devoted to nearly all crops stable. Reciting the food security mantra, the plan puts a priority on keeping grain area stable. It plans to revive production of spring wheat and wheat grown in the Yangtze River valley--area that was cut during the last grain glut about 15 years ago. It calls for keeping rice area stable while raising yields. The Ministry's "sickle plan" aims to cut corn production in a sickle-shaped belt running from the northeast to southwest, but the plan calls for expanding corn grown for silage and for fresh consumption.
According to statistics quoted by the Grain Bureau chief, "policy grain" procured by the government accounted for 64 percent of the grain produced last fall (155 million metric tons out of the total 239 mmt procured). Most of that "policy grain" is corn. Other sources report that 123.4 mmt of corn had been procured for the "temporary reserve" as of April 25--more than half the corn harvest reported by the National Bureau of Statistics.
In March, the exploding corn reserve prompted the government to announce the cancellation of the "temporary reserve" program for corn this year. A principle of "separating price from subsidy" will allow the corn price to fall this year. Instead of supporting prices, provinces are supposed to give corn producers subsidy payments.
The intent of the new policy is to alleviate the corn surplus by letting lower market prices discourage excess production and stimulate increased consumption of corn. The lower price may restore profitability for livestock producers and starch manufacturers, prompting them to consume more corn. Officials also hope the lower price of domestic corn will choke off imports of corn substitutes, including sorghum, barley, DDGS, and cassava.
Officials have now eliminated support prices for all major crops except wheat and rice. They have already announced minimum support prices for wheat and rice this year which farmers will find much more attractive than prices of other crops.
The National Bureau of Statistics report on the economic situation for the first quarter of 2016 included results of a planting intentions survey of 110,000 Chinese farmers. According to the survey, land will be shifted into the crops that still have support prices. Rice plantings are expected to rise 0.3% and wheat plantings are up 0.4%. Corn plantings are expected to fall 0.9%. Planting of cotton--which is in its third year of "separating subsidies from price"--is expected to fall 18.8% in 2016.
The Statistics Bureau report also said pork production in the first quarter was down 5.1% from its year-earlier volume. The number of pigs is still limited after an extended contraction. The shrunken hog inventory is unfavorable for corn consumption in the near term. It will take a number of months to rebuild swine inventories.
Meanwhile, a report from Heilongjiang by Xinhua News Service suggests a bigger shift in crop acreage is underway in the biggest grain-producing province. The Xinhua report suggests that farmers are shifting their acreage from corn to rice paddies. The statistics reported in the article indicate that about half of Heilongjiang's cropland was planted in corn in 2015, and this year the province's corn plantings are expected to fall about 10%. Area planted in corn is expected to decline 10 million mu while area in rice paddies is expected to rise by 3 million mu.
However, there is also a surplus of rice. Heilongjiang accounted for the largest share of government purchases of both corn and rice this year. Alleviating the corn glut may make the province's rice glut bigger in the 2016/17 marketing year.
Cheaper corn could also reduce China's feed use of wheat, wheat bran, and rice this year, a demand-side factor exacerbating the glut of wheat and rice.
The Ministry of Agriculture has released a plan for structural adjustment of crops by 2020 that acknowledges great difficulties and "hard constraints" of natural resource limits, yet the plan aims to keep area devoted to nearly all crops stable. Reciting the food security mantra, the plan puts a priority on keeping grain area stable. It plans to revive production of spring wheat and wheat grown in the Yangtze River valley--area that was cut during the last grain glut about 15 years ago. It calls for keeping rice area stable while raising yields. The Ministry's "sickle plan" aims to cut corn production in a sickle-shaped belt running from the northeast to southwest, but the plan calls for expanding corn grown for silage and for fresh consumption.
The crop restructuring plan includes no mention of prices or economics (except a mention of reducing rice production costs).
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