A large inventory will not be the new normal for China's grain sector, even though combined stocks have remained at historic highs, a senior official said as authorities prepared to encourage more private enterprise participation in the annual grain purchase arrangement.
Ren Zhengxiao, head of the State Administration of Grain, said at a news conference on Tuesday that there are no signs of consistency or stability in the country's large grain inventory, which could be reduced promptly if there were to be a sudden decrease in production or resurgence in economic growth.
With large stocks of grain and a shortage of storage facilities, the administration plans to encourage more private enterprises to take part in the summer and autumn grain purchase arrangement.
Ren said the reasons why there is currently a large grain inventory include a steady increase in grain production in recent years, along with a lack of willingness among farmers and grain processors to store grain, and the fact that many processors are operating below capacity.
China has accumulated an estimated 250 million metric tons of corn in its reserves, which is more than it consumes in a year, Reuters reported last month.
Fredrick Gale, an economist with the United States Department of Agriculture, said at the sidelines of the 2016 China Agricultural Outlook conference that China's corn reserves have been so high that it could take years to eat the massive stockpile.
"Our projections show that, even after this year, there will be an increase in corn inventory in China," he said.
Ren said the administration will take measures to reduce stocks in preparation for the summer and autumn grain purchase.
Lu Jingbo, deputy head of the grain administration, said there is no truth in a report from the USDA that says more than 20 million tons of corn reserves in China are so moldy or deteriorated that they are no longer fit for consumption. He said there have been no incidents of large-scale grain deterioration within the country's grain reserve.
The USDA report, released on April 8, estimated China could face paper losses of more than $10 billion on its State-owned corn reserves as it shakes up its agricultural support policy.
China introduced floor prices for farm products in 2006 to protect farmers from price volatility. The government buys products including wheat, corn and cotton for State reserves when market prices fall below floor prices. The central government announced an end to the floor price for corn in late March, due to the large inventory.
