China’s cornbelt regions urged to offer subsidies to boost use after bumper harvest, sources say
Move to make corn cheaper for livestock feed firms aimed at tackling corn glut
Beijing is urging regional authorities in the nation’s top four corn-producing regions to offer subsidies to livestock feed companies, the latest move to boost demand for a bumper crop, according to a source briefed on the matter.
The country’s State Administration of Grains and the Ministry of Finance issued a joint document dated January 13 outlining the recommendations to northeastern regions of Heilongjiang, Inner Mongolia, Liaoning and Jilin, according to the source and local media.
Only feed producers that produced more than 50,000 tonnes in 2015 and have local operations can apply for the subsidy. The corn must also be bought by end-April and processed by end-June, according to the source.
Other stipulations are that they must use the funds only to buy local corn harvested in 2016 and store it in their own facilities, the source said citing the document.
The size of the subsidies, which would effectively make corn cheaper for feed producers, was not disclosed.
Analysts also questioned the impact of the move as the bulk of China’s vast feed-making industry, the top user of the grain is located in the country’s south and would not be eligible for the subsidies.
Industry websites, including Shanghai JC Intelligence Co. Ltd (JCI) and cofeed.com, have also reported the details of the release without citing sources and photos of the document were circulating on Wechat, China’s mobile social platform. Their authenticity could not be verified.
A spokeswoman for the Grains Administration declined to comment. The Ministry of Finance had not responded to requests for comment.
It’s not known if the provinces, which are home to most of the country’s corn farmers, have complied with the recommendation.
The move comes after China announced a strategy at the end of December to tackle its corn glut following a decade-long stockpiling programme, including a push to use more grain as livestock feed.
It reflects an intensifying effort by Beijing to force regional authorities to bear the financial burden of buttressing their corn industries.
In October last year, Heilongjiang, Liaoning and Jilin doled out subsidies to corn processors, the second-largest users of the grain who make products such as corn starch, sugars and alcohol.
But analysts said more corn processors had benefited from the subsidies and the impact of subsidies for only a few feed producers was likely to be limited.
“This won’t help increase the demand for corn unlike the subsidies to corn processing companies,” said Cofco Futures analyst Meng Jinhui.
Still, it could give sentiment and prices a further boost.
Hopes of central government measures to spur consumption have triggered a months-long rally, with prices hitting 18-month highs on Monday. Turnover and open interest hit all-time highs, eclipsing soymeal, typically the country’s largest agricultural derivatives market.