China Announces Major Shift in Corn Price Support Policy


This week the Chinese government announced plans to end its “temporary reserve” price support program for corn and allow markets to set prices.

These changes in China’s corn policy, including its move away from the corn reserve support price and toward direct subsidy payments to producers, will be the most significant reform in China’s grains sector in many years and are scheduled for implementation in the 2016-2017 crop year. But there are many uncertainties about the transition and thus its impact on China’s corn production, prices and imports this year. Corn prices in China continue to decline, and the government still faces the challenge of moving large inventories of corn currently in storage, especially since it was procured at prices much higher than today’s.

China’s corn prices have traded lower on the Dalian futures exchange (dropping below RMB 1,500/metric ton or $5.87/bushel) and based on official Ministry of Agriculture data, prices are down 17 percent from a year ago, and the lowest since 2010, due in part to previous reductions in the reserve price, and pending changes to the support program. With lower domestic prices, China’s imports of corn and other grains could decrease significantly this year. January-February feedgrain imports were down nearly 50 percent to 2.2 million metric tons (mt). Adding dried distillers grains with solubles (DDGS), combined imports were 2.7 million mt, down 40 percent. Meat production costs are also declining in China, although it will take time for this to translate into larger production and lower meat prices, especially given China’s tight hog supplies. China’s hog production profitability is already record-high and piglet prices are more than double year-ago levels, indicating both strong demand for restocking and limited supplies – so a rebound in production is going to take time.


China’s pork/pork variety meat imports kept their strong pace through February, with February volume up 72 percent from a year ago at 136,604 mt. This included sharp increases from the European Union (89,226 mt, +83 percent) and Canada (14,235 mt, +171 percent), while imports from the U.S. (27,750 mt, +25 percent) also increased from a year ago. These results pushed China’s January-February imports to 325,395 mt, a record pace that is up 50 percent year-over-year.

According to the Ministry of Agriculture, China’s live hog prices recently topped 19 RMB/kg ($1.35/lb) – up 57 percent year-over-year and the highest since October 2011. Piglet prices have continued to soar to record levels, more than doubling from a year ago to $2.96/lb. The hog:corn price ratio is also at record levels at 9.55:1. The National Development and Reform Commission (NDRC) noted that the hog-corn price ratio passed the 9:1 mark on March 9, entering the yellow warning zone, arousing concerns among pig farmers whether the government would intervene to control the market – but so far China’s government is letting the market work.

Wholesale prices for imported pork variety meats have reportedly eased from recent peaks, though prices for feet remain up 12 to 18 percent year-over-year. Prices for stomachs are up slightly, while ears and tongues are lower than a year ago.


China’s beef/beef variety meat imports have also maintained their strong pace, with February imports up 84 percent to 38,309 mt. Brazil, which was still out of the market a year ago, was by far the largest supplier at 14,378 mt, followed by Uruguay (7,633 mt, -11 percent) and Australia (6,288 mt, +11 percent). Imports from New Zealand doubled from a year ago to 5,405 mt and imports from Canada were 2,649 mt – up from just 672 mt last year.

Through February, China’s 2016 imports more than doubled in both volume (98,049 mt, +103 percent) and value (about $456 million, +107 percent). These results were led by Brazil (33,476 mt), Australia (20,687 mt, +21 percent), Uruguay (20,623 mt, +21 percent), New Zealand (11,375 mt, +84 percent) and Canada (6,063 mt, up from just 767 mt last year).

China’s domestic beef prices continue to move slightly lower, following the seasonal post-Lunar New Year trend – down 1 percent year-over-year and averaging $4.40/lb.

Sources: China’s Ministry of Agriculture, USMEF-Beijing and Shanghai, and Global Trade Atlas