Interpretation of China's 2014 No.1 Central Document about policies of corn & related products

GUANGZHOU, China - March 17, 2014 - PRLog -- On 19 Jan., 2014, the Central Committee of the Communist Party of China and the State Council jointly published a policy on deepening the rural reform and accelerating the agricultural modernization (China's No.1 Central Document, focusing on the development of agriculture, rural areas and farmers to push forward agricultural modernization), which proposes that the government will continue to carry out the policies about temporary reserve of corn and sugar, and  minimum purchasing price of wheat, explore price insurance pilot of live pigs and launch price subsidy pilot of soybean.

Governmental purchase of corn for temporary reserve

The government strengthened the protection in 2013. Firstly, the government extended the 2012/2013 corn purchase deadline by one month. Secondly, the government published the 2013/2014 purchasing price of corn in advance and increased the purchasing price. These policies can protect the corn price from decreasing in China. For example, domestic market price of corn decreased in Oct. 2013 due to the increasing supply of corn, but the price of corn rebounded a little during Nov.- early Dec. 2013 as the governmental purchase of corn started in Nov. 2013.

Insiders think that the corn purchasing policy is of great importance to stabilize and even increase corn price in 2014 in case of its oversupply. It's reported that during 2013/2014, the supply of corn may be around 205.7 million tonnes while the demand for corn may be only around 187.7 million tonnes in China.

Governmental purchase of sugar for temporary reserve

Domestic sugar market underwent a downturn in 2013. The total output of sugar in China was 3.0 million tonnes while the sales volume of sugar was only 1.6 million tonnes. Due to the oversupply, domestic average market price of white sugar, a main kind of sugar, dropped by around 14% year on year in 2013. Its price continued decreasing in Jan. 2014, close to the production cost level.

The slumping sugar market dragged down the price of its substitute, starch sugar in 2013. In detail, domestic average ex-works price of high fructose corn syrup (F42) declined by 12.5% year on year in 2013.

Domestic sugar market still will face challenges in 2014, since it is difficult to mitigate the overcapacity of sugar at home and abroad. Additionally, domestic sugar will has less cost support as the minimum purchasing price of its raw material-sugarcane in main sugarcane planting regions in 2013/2014 is lower than that in 2012/2013.

Overall, insiders said that the governmental purchase of sugar for temporary reserve is necessary in China as it can help protect sugar manufacturers' profits and boost the sugar market.

Minimum purchasing price of wheat

It is estimated that the role of policy will weaken in wheat market in 2014 because wheat price in China has been much higher at present compared with that in 2013. According to data from CCM, domestic market price of wheat soared to around USD425/t on 16 Jan., 2014, about USD32/t higher than that on 16 Jan., 2013. Besides, the governmental storage of wheat decreased in 2013 as the consumption of wheat increased greatly in feed industry in 2012, leading to the tight supply of wheat since then. So the wheat price in 2014 mainly depends on its supply and demand.

However, the increasing wheat price will cause wheat replaced by corn in feed production.

Exploration of live pigs' price insurance pilot

Domestic average market price of live pigs decreased slightly by 2% year on year in 2013, and the market price of live pigs fell sharply from USD2,403/t on 3 Jan., 2014 to USD2,061/t on 20 Jan., 2014 due to the oversupply of live pigs. The substantial decreasing price of live pigs resulted in losses for domestic pig breeding farmers or enterprises.

Once the price insurance policy can be implemented in the near future, domestic pig breeding farmers or enterprises can obtain some extra compensation from the government when the price of live pigs decreases, which can make up somehow for the losses, reduce their breeding risk and maintain a stable cash flow.

Generally, a stable development of pig industry can ensure a strong demand for feed and feed additives, such as amino acid and vitamin.

Launch of price subsidy pilot of soybean

In fact, it is the first time for China to implement the price subsidy pilot policy of soybean. China carried out the temporary purchase of soybean for reserve during 2008-2013, and the governmental purchasing price of soybean kept increasing in this period. As a result, domestic price of this product was much higher than that of the imported one. So domestic soybean processing enterprises turned to the cheap imported soybean. As data from China Customs shows, China imported around 63.4 million tonnes of soybean in 2013, up 8.6% year on year.

Insiders said that the policy can weaken the dependence on imports for soybean and encourage domestic farmers to plant soybean.

Source: Corn Products China News (http://www.cnchemicals.com/ResearchCenter/Newsletter/6/Co...) issued by CCM in Feburary.

Table of Contents of Corn Products China News 1402 (http://www.cnchemicals.com/Product/Newsletter/6/Interpret...):

China returns 2,000 tonnes of GM DDGS to the US

Chinese corn products Imp. & Exp., Nov. 2013

Export volume of China's furfural rebounds, Oct.-Nov. 2013

Price update of corn products, Jan. 2014

Review of the ex-works price of corn germ meal, H2 2013

Ex-works price of xanthan gum decreases sharply in 2013

Guangji Pharmaceutical suspends partial VB2 production line

Shandong Longlive opens online flagship shop at Tmall

Frequent outbreaks of avian influenza challenges poultry industry again

Edible ethanol industry undergoes downturn in 2013

Market price of wheat in China enjoys marked uptrend, June-Nov. 2013

Corn Products China News, a monthly publication issued by CCM on 20^th, features “Supply and Demand”, “Import and Export Analysis”, “Price Update”, “Market & Company Dynamics”, “Policy”, “Corn Supply” and other more information researched and reported by CCM’s professional journalists. It is a reliable intermediate for you to know more about the corn industry in China even in the globe.