Attache: China's Overproduction in 2016 Will Add to Bulging Stocks

Posted on 03/09/2017 10:24 AM

The U.S. ag attache in China says the country's "huge grain stocks continue to impose severe pressures on China's production and trade policies." It says while it recognizes it needs to reduce high guaranteed prices for producers -- especially corn -- it has "not articulated when or how it will do this." As a result, the attache says China is once again expected to produce record, corn, wheat and rice crops in 2016.

"This production will, in turn, add to already bulging stocks, currently estimated at approximately 250 MMT, or roughly half of global reserves," states the attache. "It is also likely to once again lead to artificial suppression of imports and artificially high prices for meat and dairy. At the same time, increasingly vocal and public calls for reform, including in a major policy document, send a strong signal that the current price subsidy system is unsustainable. The Number One Document called for reform of corn subsidies to allow corn prices to reflect supply and demand. However, the government has not articulated when or how it will reform corn subsidies. Support prices set far above international prices are helping to sustain record grain production, suppress demand and leading to the buildup of massive reserves."

In 2015-16, the attaché expects China to produce a 225 MMT corn crop and a 130.19 MMT wheat crop. "Management of excess stocks is becoming an urgent issue for government officials," stresses the attache.

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"The Government of China still treats grain re serves as a state secret and does not publish any official statistics. Most private estimates of China’s grain stocks are higher than USDA’s estimate, although there are also many reports that a significant (but unknown) portion of the reserves have gone out of condition," says the attache.

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