Q1 2016 witnessed the great changes in policy, price and import & export of corn in China's market.
- Policy
In 2016, the Chinese government issues some policies and measures for the corn
industry.
23 April: The Ministry of Agriculture of
the People's Republic of China (MOA) issued the China Agricultural Outlook
Report (2016-2020), making a prediction on indexes of China's corn industry
including planting area in the coming 10 years. China planned to reduce the
planting area and yield of corn while increasing the consumption and export.
11 April: The MOA issued the Adjustment
Plan on the National Crop Farming (2016-2020), planning to reduce corn planting
areas and develop other corn varieties such as silage corn.
28 March: The National Development and
Reform Commission, together with some departments, announced to cancel the
purchase policy of corn for temporary storage in Jilin, Heilongjiang and Liaoning
provinces as well as the Inner Mongolia Autonomous Region and then adjust to a
new mechanism – "market-oriented purchase + subsidy". Meantime, China
will set the subsidy policy and minimum purchase price for corn.
Feb.: The State Administration of Grain
(SAG) issued a letter to collect the list of processing enterprises that are
going to participate in the directional selling of overstored grains, which
officially opened the gate for the directional selling of corn.
Early in Nov. 2015, the MOA issued the Structure Adjustment Plan on Corn
Planting Area in Sickle-shape Region (2016-2020), hoping to slow down the
irrational increase in corn supply by reducing corn planting area. The planting
area is expected to be cut down by over 3.33 million ha (50 million mu) in the
sickle-shape region by 2020.
Notably, the purchase volume of corn for temporary storage hits a record high
in 2015/16, being 125.42 million tonnes as of 30 April, 2016.
- Price
Affected by the high-level domestic corn inventory, China's market price of
corn has kept falling since H2 2015. The average figure dropped to USD300.14/t
in Q1 2016, down by 20.26% YoY. Average market prices in Jan.-March were:
Jan.: USD309.34/t, a YoY fall of 16.84% and
a MoM rise of 4.10%
Feb.: USD303.56/t, a YoY fall of 18.61% and
a MoM fall of 1.86%
March: USD287.53/t, a YoY fall of 25.15%
and a MoM fall of 5.20%
At the same time, the falling corn price caused declines in average prices of
some downstream products in Q1 2016:
Corn starch (North China): ex-works price
at USD360.92/t, down by 24.58% YoY and 9.42% MoM
Furfural: market price at USD1,047.41/t,
down by 23.61% YoY and 11.41% MoM
Market price of corn in China, Jan. 2014-May 2016
Source: CCM
- Import & export
Q1 2016 saw abnormal import & export of corn in China. Although the market
price kept falling in China, it was still higher than the import price, which
led to weakening price advantage in the international market. Therefore, China
import more corn but export less in Q1.
Generally speaking, the first quarter
of a year is the busy season for corn import in China and then the import
volume will fall back in the second quarter. However, the import volume in
Jan.-Feb. 2016 was only a tenth of that in Jan.-Feb. 2015, while the figure
rebounded in March – a YoY rise of 1,037.82% and a MoM rise of 823.78%.
According to China Custom, China imported 645,500 tonnes of corn in Q1 2016,
down by 47.64% YoY. Notably, the import volume will maintain a low level, due
to China's reduction in corn inventory in later period, continuously falling
domestic corn price, and narrowing gap between domestic market price and import
price.
Imports of corn in China, Jan. 2014-March 2016
Source: China Customs
According to CCM's price monitoring, China's market price of corn is
USD280.59/t in May 2016. Although the price still maintains a low level, it has
shown a slight rebound, mainly because of the tight supply of corn in the
market now – most of corn in the market has been stored by the state and the
surplus high-quality one has been basically consumed.
On 13 May, the SAG
conducted an auction for the directional selling of corn (400,000 tonnes,
harvested in 2012) only for alcohol and feed enterprises, which indicates an
official start for the directional selling of overstored grains this year.
Recently, all provinces will announce the lists of enterprises that participate
in the directional selling in succession.
As the SAG announced to hold auction
fairs for overstored corn and corn stored outdoors in the SAG and national
grain trading centers of all provinces (districts and cities) each week since
27 May, 2016, it is predicted that a large quantity of overstored corn will be
sold in later period.
Coupled with that many provinces have made auctions for
corn, the policy-oriented grains will dominate the market. Boosted by the low
auction price, the domestic market price of corn will reduce to some extent at
that time. CCM will make follow-up reports on the auctions.
This article comes from Corn Products China News 1605, CCM
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Tag: corn