corn harvest
China's overall grain production down 6.1 million tons in 2016.
WASHINGTON, D.C., U.S. — In 2016, China removed price supports for corn producers, who face some of the highest costs of production in the world. Recent policy proclamations have introduced many farm stimulus programs to encourage China’s nearly 250 million farmers to diversify production. Overall, China has moved past a food security program focused on staple grains and is looking to a feed security program based on a basket of products, according to an April 4 report from the Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA).  

Market year 2017-18 rice, wheat, sorghum, and barley production are forecast slightly higher on reports that more corn farmers are turning to alternative crops. Market year 2017-18 corn production is forecast to decline 1% from market year 2016-17, although some recent industry planting surveys suggest that corn production could decline even more, especially in northeast China.

Corn producers have several market-based and policy-driven incentives to switch to other grains and crops, including wheat, rice, soybeans, sorghum, barley, silage corn and fodder. Most corn producers who will switch to alternative crops consider rice to be the next best choice, the report said. The minimum support price for rice declined in 2017 for the first time in nearly a decade. However, in relative terms, producer margins for rice remain strong. Unfortunately, given limited water resources only a small share of corn producers have access to adequate water supplies or will benefit from recent provincial irrigation projects. According to the FAS, a vast majority of corn producers will plant dry land wheat during the market year 2017-18 as domestic prices remain relatively strong. Smaller numbers of corn producers will switch planting to sorghum and barley where they are close to nearby markets with futures marketing contracts in place. Still other producers will opt to switch to planting soybeans, silage corn, or fodder. New land conservation programs will encourage a small share of China’s corn producers to remove land from production.

Based on China’s official statistics, calendar year 2016 overall grain production fell to 219.5 million tons, down 6.1 million tons from 2015. The decline ends a 13 season streak of record production. China estimates that corn production accounted for an estimated 83% of the total decline in grain production.

Even though the central government has signaled a move toward a market-oriented corn policy, reforms will not take effect immediately. Officials will continue to administer local, provincial and central government interventions in the near-term to partly compensate producers for lower revenues, support prices, and offset the costs of switching production to other crops with relatively lower producer margins. The National Development and Reform Commission (NDRC) aims to improve its minimum purchase price for rice and wheat and reduce state grain stocks of corn and wheat.