October 16, 2017 / 8:11 AM / 2 months ago

Top China corn province cuts subsidy for farmers growing the grain

BEIJING, Oct 16 (Reuters) - China’s top corn-producing province is cutting the subsidy for farmers churning out the grain by 13 percent this year, official media said on Saturday, as Beijing pushes to whittle down stocks of the commodity and encourage growers to plant other crops like soy.

Heilongjiang province in the country’s northeast will give corn growers 133.46 yuan ($20.30) per mu (0.067 hectares) of corn grown this year, said the Xinhua news agency, compared with 153.92 yuan last year.

Subsidies for soy growers are significantly higher than corn at 173.46 yuan per mu. It is the first time Beijing is giving soybean farmers the so-called “grower subsidy”, after Beijing abandoned a three-year “target price” subsidy for soybeans linked to market prices.

But analysts said the move may not have the desired impact, with high corn prices this year expected to encourage many farmers to return to corn.

The most active corn contract on the Dalian Commodity Exchange is around 13 percent higher this week than October last year.

“Corn farmers can still make good money growing corn because corn prices are up a lot and the cost of renting land is much lower this year,” said Zhang Dalong, analyst at Cofco Futures.

China began to reduce its support for corn production last year in a bid to rebalance a huge oversupply with demand. Those efforts are expected to lead to its first deficit in years, forecast at around 4.3 million tonnes.

But it still has an estimated 180 million tonnes of ageing corn in warehouses, built up during a now-ended stockpiling programme.

Initial efforts to encourage farmers to stop planting corn have seen output of the grain in Heilongjiang fall around 12 percent in the 2016/17 crop year to 31.2 million tonnes, with acreage down 9.3 percent, according to the China National Grain and Oils Information Center, an official think-tank.

But Zhang expects planting in Heilongjiang and other northeastern provinces to recover in 2018, as farmers favour corn over soybeans for its lower growing and labour costs.

“Growing corn will still be more profitable and to farmers in the northeast, corn is the easiest to grow,” he said.

Heilongjiang is also planning to encourage investors to build large-scale local processing plants to help consume some of the province’s grain.

$1 = 6.5755 Chinese yuan renminbi Reporting by Dominique Patton and Hallie Gu; Editing by Joseph Radford

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