Chinese moves, being closely scrutinised by investors worldwide, to curtail corn output in the face of huge inventories will not, for now, see a switch to soybeans, meaning a continued strong reliance on imports of the oilseed.
There is mounting speculation that China, which has already reformed subsidies on some crops, such as cotton, will revise too a system of guaranteed values for corn – a policy which has landed the government with huge stocks of the grain, and supported domestic prices at well above world market rates.
Indeed, China’s important National Development and Reform Commission has in recent days said that the country “will move to a more market-oriented pricing mechanism on corn procurement”, the US Grains Council said.
“Action could be taken as early as this year, although a definite timetable and details of implementation were not specified,” the council said, noting that the current system had left Chinese “livestock producers and ultimately consumers… [paying] the highest feed grain prices in the world”.
The existing policy has also resulted in huge imports of alternative feed grains, such as sorghum, not covered by quotas, meaning that “any change in China’s corn policy will thus affect multiple commodities and exporting countries”, the council added.
‘Necessary to reduce corn area’
Separately, the US Department of Agriculture’s Beijing bureau reported that China’s agriculture minister, Han Changfu, said “it will be necessary to moderately reduce corn area” in the country’s key north east growing area.
He flagged “the need to” replace some corn in drier areas with drought-resistant crops such as pulses, to turn more corn into silage and to encourage rotation of the grain with soybeans, the bureau said.
Soybeans are, in agronomic terms, a key alternative to corn for plantings programmes in many countries, notably the US – but in China the oilseed is relatively unpopular with farmers thanks to a far less generous subsidy than for the grain.
“However, no specific support policy/or measures were announced to adjust corn area in the north east provinces in 2016,” the bureau said.
“The lack of details in how this crop adjustment proposal would be executed indicates it will have a limited impact in boosting soybean area in 2016.”
Investors have been mulling the potential for reduced corn area to lift soybean plantings, with Terry Reilly at Chicago broker Futures International, for instance, asking last week, “where would [Chinese] corn area go? To oilseeds perhaps?”
Soybean import prospects
Indeed, the bureau was upbeat on Chinese imports, seeing them in 2014-15, on an October-to-September basis, hit a record 74.0m tonnes – 500,000 tonnes above the USDA’s official estimate, and a rise of more than 3.6m tonnes year on year.
And it backed USDA expectations that imports will rise further in 2015-16, to 77.5m tonnes, supported by the country’s growing taste for meat, and a reluctance to rely on imports which means producing more and more itself.
Over the next decade, Chinese industry leaders see domestic pork consumption rising by 3.3% annually, with growth rates at 2% for beef and 2.4% for mutton.
“This constant growth in livestock products will fuel a stable demand of protein ingredients which will rely on imports of soybeans,” the source of soymeal, a major feed component.
The bureau played down the prospect of China importing more meat, saying that “China’s industry leaders insist that domestic animal production is critical for the welfare of the Chinese consumers”.
The long-term outlook for soybean imports “remains bright”.
(Source – http://www.agrimoney.com/news/chinese-moves-to-curb-corn-area-wont-lift-soy-sowings–8668.html)