To deal with the too much corn inventory in China, the Chinese government decided to cut the amount of land used for corn cultivation by 3.33 million ha over the next five years with the goal to cut over 666,666 ha in 2016. However, it would have limited effect on the corn industry, according to analyst CCM.
Guidance on Structure Adjustment Plan on Corn Planting Area in the ‘Sickle-Shaped Region’ (2016-2020) has finally been published in Nov. 2015, a statement released by China’s Ministry of Agriculture (MOA) confirmed that the policy will include targets to reduce the total area of land used for corn cultivation by 3.33 million ha by 2020, and to focus on developing silage corn and soybean.
“Structure adjustment on corn cultivation area is the key part in the agriculture reform of supply-front,” said Ye Zhenqin, director of the general office, MOA.
The ‘sickle-shaped region’
The target to reduce the amount of land being used for corn production in Northeast China - often referred to as the ‘sickle-shaped region’ due to the region’s appearance on maps of China. The “sickle-shaped region” is one of the important areas to cultivate corn.
The “sickle-shaped region” includes the areas of 13 provinces, such as Hebei, Shanxi, Inner Mongolia, Liaoning, Jilin and Heilongjiang, with the areas of 23.3 million ha on corn cultivation, accounting for over 60% of total land used for corn cultivation in China.
In 2015, the area of land used for corn cultivation in “sickle-shaped region” was about 10.4 million ha, 4.66 million ha more than that in 2005, which made “sickle-shaped region” the most rapid developing area on corn cultivation. However, some areas in the region belonged to non-dominant corn region.
Finally, in Nov. 2015, China decided to cut the amount of land used for corn cultivation in the “sickle-shaped region” by 3.33 million ha by 2020 and planned to cut over 666,666 ha in 2016.
“The adjustment was made according to the changes of the grain demand and supply situation,” pointed out by Ye.
“Currently, the supply of corn was over the demand of corn, which had put more pressure on the corn inventory, especially the corn inventory in Heilongjiang, Liaoning, Jilin and Inner Mongolia. The market price of corn was much lower than before,” said Ye.
Too much corn inventory
With enough grain, fewer enterprises purchased corn in the market and the farmers stored less corn, according to Han Changfu, minister of MOA.
“Grain was mainly purchased by the government. Therefore, too much corn inventory actually means too much corn inventory in the government,” said Han.
“Corn contributed the most in the twelve consecutive growth years in grain production,” said Ye.
In the past twelve years, the area of corn cultivation increased 14 million ha with the corn production up 108.7 million tonnes, accounting for 57% of the total growth of the grain production.
Besides, influenced by the price differences between the domestic and abroad market, the imported volumes of corn and its substitution kept increasing year by year.
In 2015, China imported 4.73 million tonnes of corn, up 82% year on year. In the meanwhile, 10.7 million tonnes of sorghum, which was not subject to mainland’s quota administration, was imported to China, up 85.3% year on year. Besides, 6.82 million tonnes of DDGS was imported, up 26% year on year.
All of the imported products captured the domestic corn market, which put greater press on reducing the corn inventory.
Limited effect on the corn market
The lower price to store and purchase corn by the government in 2015 as well as the reduction of the land used for corn cultivation would definitely affect the corn feed market and agriculture materials market. However, the effect may be quite limited, according to CCM.
“In a short term, the reduction on the corn areas may have limited effect on the corn feed market both home and abroad,” said Liang Jiawei, editor of Corn Products China News.
“To reduce 666,666 ha of corn land in 2016 equals to the reduction of 20,000 tonnes of corn feed in cultivation. However, about 1.1 million tonnes of corn feed are used per year in China. The 20,000 tonnes of corn feed only accounted for 1.8% of the total corn feed,” said Liang.
As for the corn production, though China decided to reduce the corn cultivation area, it also influenced limitedly on the total production of corn.
“To reduce 666,666 ha of corn land in 2016 also equals to the reduction of 6 million tonnes of corn in production. By 2020, about 30 million tonnes of corn would be reduced, only accounted for less than 14% of the total corn production per year in China,” analyzed Liang.
“Though the effects are limited, most importantly, this measure taken by the government is actually aimed to force out the inefficient capacity in agriculture and to promote the sustainable development,” Liang added.
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