China is making reforms to its corn production and demand programs that could squeeze the availability of corn in just a few years, said the USDA’s Foreign Agriculture Service in a “Gain Report” near the end of September.
“Over the summer, there have been several announcements that could impact the grain sector, particularly for corn,” the report said. “The most recent announcement, the goal to adopt E10 usage in gasoline by 2020, if realized, could sharply boost corn consumption and reduce stocks. When combined with the ongoing reform, China could find itself tight in corn just in a few years.”
VAT SIMPLIFIED; RMB APPRECIATION BOOSTS IMPORTS
In May China’s Ministry of Finance consolidated the four-tier Value-Added Tax into three tiers – 17%, 11% and 6% rates, eliminating the 13% rate, the FAS said. Most importantly for the agriculture sector, the VAT for agricultural products, including grains, was reduced from 13% to 11%.
In addition, the Chinese currency, the renminbi, or RMB, has appreciated steadily against the US dollar this year. The exchange rate in January was 6.94 RMB to one US dollar; in July, it was around 6.72 RMB, and in early September, the rate was 6.59 RMB.
Strong Chinese imports were attributed to the reduced VAT combined with the appreciation of the RMB.
FOREIGN INVESTMENT IN AG PROCESSING REMOVED
In June, China’s National Development and Reform Committee and the Ministry of Commerce released the 2017 Foreign Investment Industrial Guidance Catalogue, the FAS said.
It removed restrictions on foreign investment in the processing of oilseeds, sugar, rice, flour and deep processing of corn.
ANIMAL AGRICULTURE DEVELOPMENT IN GRAIN AREAS
In early August, the Ministry of Agriculture published an opinion piece “Accelerating the Development of Modern Animal Husbandry in the Main Grain Producing Areas of Northeastern China.” The FAS said it stressed the acceleration of modern animal husbandry in the Northeast to consume corn stocks and suggested firms seize the time as feed cost has eased after the corn policy reform.
The opinion piece encouraged farmers in the Northeast region to develop livestock breeding and feed industries, the FAS said.
SUBSIDIES FOR SILAGE AND LESS GRAIN CORN PLANTING
In August, the Heilongjiang Farm & Land Reclamation Administration announced up to 60 RMB per ton subsidies for silage corn, up to 120 RMB a ton for half-dried silage feed oats and up to 240 RMB per ton for half-dried alfalfa silage, the FAS reported.
In September, the MOA said it had reduced its corn planting area, of which a third was directed toward soybeans. Next year, the MOA expects even more planting cuts.
In its Grain-to-Feed Implementation Plan, the MOA corn growers in several regions to switch crops to silage corn, alfalfa, oats, sweet sorghum and legumes.
There also were calls from government researchers and academics to lower or suspend the Minimum Support Price for wheat and rice this year.
CATTLE, BEEF RECAP
Two lots from Texas sold at the Livestock Exchange video auction Wednesday at $108.25 and $108.50 per cwt.
Cash cattle this week have traded lightly at $107 to $108 per cwt on a live basis, steady with last week, and at $170 on a dressed basis, down $2.
The USDA’s choice cutout Thursday was down $0.16 per cwt at $197.25, while select was off $0.77 at $188.78. The choice/select spread widened to $7.86 from $7.86 with 109 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $156.21 per cwt, up $0.56. This compares with Thursday’s Oct settlement of $153.57, up $1.47.