Q1 2016 witnessed the
great changes in policy, price and import & export of corn in China's
market.
Source: Bing
- 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 imported more corn but exported
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. In the near future, 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