China’s
corn price remains stable in this harvesting season, due to less output of
corn, hindered by extreme weather occurrences. However, the price is likely to
further fall in the next months, facing high supply and sluggish demand.
The
harvesting season of corn in China in September and October is traditionally
the times when new corn is brought into the market which lowers the price
significantly. This year, the price of corn remains high.
The
main reason can be found in extreme weather occurrences in the major corn
planting region of Northeast China. On the one hand, the output of corn in
China was lowered significantly, due to drought occurrences in the
traditionally corn-planting area of northern China. Those have forced farmers
to switch their crops to soybeans and other substitute grains.
On
the other hand, the beginning of October has witnessed persistent rainy
weather, which has not only hindered the corn harvesting but also made
transportation much more difficult and hence slowed down the market supply.
As
a result of the tighter supply, according to the Ministry of Agriculture, the
corn output in China is likely to fall by about 3.6% in the 2017/18 harvesting
season, compared to the previous year.
China’s
average price of corn only dropped down by 0.39% from September to October but
witnessed an increase of more than 3% compared to 2016. For comparison, in
2016, the price dropped from USD272.6/t in September to USD242.3/t in October,
down by 11.1%.
Next price falls likely
in 2018
With
the seasonal sales peak approaching and more of the stockpile are about to be
sold, the pressure on the corn supply will further increase in the next months.
In
addition to that, the demand for corn from livestock farmers is decreasing as
well, due to the low prices of animals like pigs and poultry. Many
corn-processing companies also still rely on their inventories and are less
willing to buy new corn from the market.
Increasing
supply and sluggish demand will be the driven factors for a further price drop
of corn in the beginning of 2018.
Background of China’s
corn policy
China
is the world’s largest corn producer after the USA and offers their corn to the
market usually in September and October after the yield.
As
China is doing everything to make sure they are able to feed their immense
population even in the sight of bad crop harvest seasons, the country normally
enters the world market for corn as a buyer.
What’s
more, around 70% of China’s corn stockpile has expired, which makes it
non-usable as feed material. Imported corn from the USA has much higher
quality, which attracts Chinese livestock farmers to get the higher quality
corn from international markets.
Since
the end of the stockpile-strategy of corn in China from 2016, the country is
encouraging farmers to switch from corn to other grain plantings. Recently, the
government has announced to reduce the corn subsidy for farmers in the main
planting region to support the change. This grants other grains like soybeans a
higher subsidy in the coming planting season.
The
middle kingdom aims to rebalance the huge gap between corn supply and demand in
the country. However, farmers still seem to favour planting corn compared to
other grains due to the low growth and labour costs with good prices
at the market.
About CCM
CCM
is the leading market intelligence provider for China’s agriculture, chemicals,
food & ingredients and life science markets.
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