China to Subsidize Processors to Use Domestic Grain

China is expected to cut its corn purchases for domestic stockpiling by 50% in the 2015/16 season compared to the prior year, as local governments offer subsidies to processors who use domestic grain stocks.

China’s Jilin province, the second biggest corn producing region in the country, is offering processors subsidies of 250 yuan (US$39.38) per tons for buying local corn from the new crop, and 350 yuan (US$55.15) per ton for using corn from the state reserve between the months of October through December. Inner Mongolia and Hielongjiang are expected to soon follow in kind and offer similar subsidies to processors of ethanol, starch, and corn sweeteners.

During a six month period beginning next month, China is expected to buy between 40 million and 50 million tons of corn for its reserve stock compared to 83 million tons during 2014/15. However, even at these lower volumes, the country’s corn stockpile will still top 200 million tons – 20 million tons more than its annual consumption.

China is forecast to harvest a bumper corn crop this season of a record 228 million tons, according to the China National Grain and Oils Information Center (CNGOIC). Coupled with the lower buying and increased use of domestic supplies, Chinese corn imports could see a decline resulting in downward pressure on global prices.

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