China to let market decide its corn prices

Beijing | Reuters — China will let the market decide its domestic state corn prices to help cap the country’s rising imports and record-high level of state reserves, a senior official was cited by state media as saying on Monday.

“The direction of corn reform is… to let the market decide prices, and (state support) prices will no longer play a role in subsidizing farmers,” Chen Xiwen, deputy director with the Central Rural Work Leading Group, was cited by People’s Daily as saying.

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The group is the country’s top rural affairs decision-making body.

Chen did not give any schedule for the reform, but said the reform targets a reduction of imports of corn substitutes if domestic corn prices were in line with the global level.

The reform also aims at more sales of domestic corn by commercial companies and no more increase in state reserves, Chen was cited as saying.

Market participants have expected Beijing may start the reform as early as this year and could let domestic corn prices fall to 1,600 yuan (C$346) per tonne in line with imported prices.

The big drop was anticipated after state corn reserves climbed higher than expected during the 2015-16 state stockpiling scheme, with purchased volumes by the end of last week exceeding 73 million tonnes, industry sources said.

The country’s total corn stocks have already exceeded 200 million tonnes, enough for more than one year of consumption, after years of stockpiling.

Earlier this month, Chen was cited by the China Daily newspaper as saying that China must lower corn prices to reduce its massive stocks and curb imports.

Reporting for Reuters by Niu Shuping and Dominique Patton.

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