China, the world's second-largest corn consumer, will let the market decide domestic corn prices and scrap its nine-year old stockpiling scheme, according to a regional television report over the weekend. Instead of propping up prices by buying up corn, Beijing will directly subsidise farmers and stop stockpiling the grain from autumn this year, state-owned Inner Mongolia Television reported over the weekend.
There has been no official announcement regarding the policy change. The National Development and Reform Commission, the policy-making body, could not be reached for comment. Over the past few months, a series of draft reform plans have stirred the market after the country's corn stocks hit a record high of more than one year of the country's consumption, leading to expectations that Beijing will change its corn stockpile policy.
A senior government official said last month that China was likely to unveil a new state corn price policy this month, with the aim of bringing domestic prices in line with those on the international market, thereby deterring imports. On Monday, the news triggered the selling of corn at the Dalian Commodity Exchange, with the new-crop January 2017 contract down 3.2 percent and dropping to a one-month low.
"There are still divergences among the shorts and longs," said Xu Xiaoyan, an analyst with Guohai Liangshi Futures. "The longs are doubtful over the news which was released by a local television station." Open interest in the January contract rose on Monday to 1.158 million lots, up from 930,358 lots on Friday. One lot is equivalent to 10 tonnes. China's domestic corn policy has been closely watched by the international market as any freeing-up of prices could make the domestic crop competitive and reduce the need for imports. China imported a record of more than 40 million tonnes of corn and corn substitutes in 2015.
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