End to Chinese corn stockpiling and policy change may see slow down in sorghum trade

By Aerin Einstein-Curtis

- Last updated on GMT

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© iStock.com

Related tags Supply and demand Cereal

Reforms of the Chinese internal corn market and an end to a policy of stockpiling could hit US sorghum exports.

China's State Administration of Grain and National Development and Reform Commission Central Agricultural Office this week announced the end of a policy which had set a minimum price for corn produced by domestic growers.

The authorities said the new program will allow for more market-based pricing system and more competition - likely to make Chinese corn cheaper, thus reducing the need for corn imports.

The policy reform will mean China's nine-year old corn stockpiling program, designed to support farmers but which mean huge inventories were built up, will stop at the end of the current season. 

The new reforms will be market-oriented but will still allow for farmers’ interests, by actions such as subsidies to producers in the interest of offering a stable income, said the Chinese authorities.

Commerzbank, in a briefing on the end of the stockpiling program, noted that while China's corn imports have been limited - 5.5m tons in the past five years - any additions, however small, to an amply supplied global corn market with large stocks could send world corn prices lower.

Implications for sorghum trade

Commenting on the policy change, Tom Sleight, US Grains Council (UGC) president, told us: “China is trying to do something about an overhanging corn supply, which was creating market distortions."

The domestic corn prices in China have already started to decline, dropping by about 30% in the past six months, said Sleight. However, Chinese corn is still priced above the global corn market.

Although, there was some expectation that changes were coming to the Chinese market, the timeline has been a surprise, he said. “We are hopeful they will be a step in the right direction toward more market-oriented decisions related to the supply and demand for corn,” ​said Sleight.

“Like others, we are closely following the market implications of the announcement,” ​he said.

China has not been buying a large amount of corn from the US, he said, so there is not much expectation for great alteration in that area. 

However, China does import a lot of other feed grains and the Council is set to watch what the announcement will mean for the US sorghum market. Chinese farmers, since 2013, had been relying on imported sorghum, DDGS, and cassava as alternatives to the more costly corn for animal feed. 

Imports of US sorghum by Chinese buyers almost tripled last year to 10m tons, according to data from the US Department of Agriculture (USDA).

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