Ethanol Blog

A recent announcement by China revealed a plan to modify its corn policy in order to use more market factors to set prices, as well as ending its corn stockpiling program, according to an article by the U.S. Grains Council (http://bit.ly/…). The Council detected signs that the reforms would be implemented through its careful monitoring.

According to Bryan Lohmar, the Council's director in China, the Chinese government stockpiling program was a very expensive policy to have in place.

"It is costing China a lot of money to store the grain; it's difficult to keep the grain in condition; and China was also losing money by buying corn at a high price when world corn prices were low," Lohmar said.

In addition to the expenses involved, the stockpiling policy was causing a number of environmental concerns. Chinese officials cited concerns over farmers growing corn year-after-year on the same land and using large amounts of nitrogen fertilizers.

China's glut of corn stocks is believed by many in the ethanol industry to be the motivation behind the country's on-going DDGS anti-dumping and countervailing duties investigation. Some experts claim that China's trade antics in recent years were an attempt to force Chinese buyers to use up the stockpiles of corn, much of which was rumored to be in poor condition.

Lohmar added, "While China has not announced what is going to replace the price support program, it would not surprise me if there was some conservation-type criteria included in the new policy."

The new policy may cause some disruption and uncertainty in the market about how the change will affect exports to China. However, Lohmar said he thinks it will be beneficial for global grain markets."Over the long term, a market-oriented feed industry in China is best for everybody," he said in the newsletter.

Cheryl Anderson can be reached at Cheryl.anderson@dtn.com

(ES)

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