China: Grain and Feed Update
China’s huge grain stocks continue to impose severe pressures on China’s production and trade policies. While officially recognizing the need to reduce the high guaranteed producer prices for food grains (especially corn), the government has not articulated when or how it will do this. As a result, China is once again expected to produce record corn, wheat, and rice crops in 2016. This production will, in turn, add to already bulging stocks, currently estimated at approximately 250 million tons, or roughly half of global reserves. It is also likely to once again lead to artificial suppression of imports, and artificially high prices for meat and dairy. At the same time, increasingly vocal and public calls for reform, including in a major policy document, send a strong signal that the current price subsidy system is unsustainable. The Number One Document called for reform of corn subsidies to allow corn prices to reflect supply and demand. However, the government has not articulated when or how it will reform corn subsidies. Support prices set far above international prices are helping to sustain record grain production, suppress demand, and leading to the buildup of massive reserves.
