WASHINGTON, D.C., U.S. — China’s market year 2016-17 soybean production is forecast to recover to 12.5 million tonnes from the 11.6 million tonnes in the previous year, compared to the U.S. Department of Agriculture’s (USDA) official data of 11.8 million tones, the USDA’s Foreign Agricultural Service (FAS) said in a May 31 report.

In 2016, China’s recovering swine production and the steady growth of its poultry sector encouraged growth in the feed production industry from the 200 million tonnes in 2015. To meet the feed production industry’s growing demand for protein sources, soybean imports are forecast to hit another record at 85 million tonnes in market year 2016-17, up from the estimated 82 million tonnes in market year 2016-17. This is lower than the official USDA data forecast of 87 million tonnes for market year 2016-17 and the 83 million tonnes estimate for market year 2015-16. Meanwhile, vegetable oil imports are expected to level off in response to the large crushing capacity for oilseeds coupled with China’s release of state rapeseed oil reserves.

Due to the recent change in the Chinese government’s corn policy, domestic soybean production is forecast to recover. The report’s data is slightly lower compared to USDA May 2016 official data. This is based on a forecast planted area of 6.9 million hectares, up 7.1% over the previous year.

In late March, China’s National Development and Reform Commission (NDRC) announced that the temporary corn reserve program in three Northeastern provinces and Inner Mongolia will be replaced by a new market-oriented purchase mechanism. As of this report, NDRC did not disclose details on how the new policy will operate. This policy change will effectively eliminate the profit advantage for corn over substitute crops such as soybeans. In market year 2015-16, under the temporary corn reserve program, the Chinese government purchased corn at prices higher than the international market price at RMB2,000 per tonne but lower from the peak price of RMB2,250 per tonne offered during the previous year. In addition, the government’s assurance that the direct subsidy to soybean farmers will continue in market year 2016-17, based on a target price of RMB4,800 ($762 per tonne) is also encouragement for farmers to plant more soybeans.

China’s Ministry of Agriculture also plans to cut corn acreage by 1.33 million hectares in market year 2016-17 to alleviate the burden of the current large state corn stocks. It also plans to promote crop rotations to maintain land fertility and sustainability. In an effort to help farmers with crop rotation (replacing corn with soybeans or forage crops), the central government decided to provide RMB3.25 billion ($500 million) as subsidy to farmers in about 100 counties. China’s Ministry of Agriculture also set up demonstration farms in Heilongjiang Province to demonstrate the benefits of crop rotation. The reduced corn area is expected to be partly used for soybeans. According to China’s Ministry of Agriculture, the plan is expected to increase the soybean planted area by 6 million 400,000 hectares from the previous year. The rest of the planting area will be replaced by other crops such as forage and pulses.

In its May report, China National Grain and Oilseed Information Center (CNGOIC) also forecast market year 2016-17 corn acreage to fall by about 1 million hectares from the previous year, while the soybean area is forecast to expand to 6.96 million hectares from the 6.45 million hectares in market year 2015-16. CNGOIC reported that the soybean area in Liaoning Province recovered in market year 2016-17, up by 4.8% over the previous year.