China’s National Development and Reform Commission (NDRC) announced last week that the country will move to a more market-oriented pricing mechanism on corn procurement.

Market-oriented reforms in China’s corn sector have been discussed for several years and while there are outspoken advocates of market liberalization in China, there has also been significant resistance to reforming this policy.

The NDRC is China’s top economic management agency and reports directly to the State Council. While details are yet to be disclosed, the announcement of a policy shift by NDRC is a potentially important signal that China may be prepared to rebalance its trade distorting policies on corn.

At the same time, however, the NDRC indicated it will continue to control grain imports and monitor market trends closely. The announcement suggested that action could be taken as early as this year, although a definite timetable and details of implementation were not specified.

China’s internal price support system for corn, coupled with quotas and non-tariff barriers to corn imports, has distorted markets. Chinese feed manufacturers, livestock producers and ultimately consumers pay the highest feed grain prices in the world. While the size of government owned stocks is a state secret, stocks are widely believed to be very large and increasingly burdensome.

Restrictions on corn imports have also boosted China’s imports of other feed ingredients.

For next year, the U.S. Department of Agriculture (USDA) projects that China will import approximately 19 million metric tons of coarse grains from all sources. Of this total, only 3 million tons (118 million bushels) is projected to be corn, with the bulk being sorghum and barley. China is also the world’s largest importer of distiller’s dried grains with solubles (DDGS) and imports significant quantities of cassava, which competes with coarse grains.

Any change in China’s corn policy will thus affect multiple commodities and exporting countries.

The Council will continue to work in China and around the world on grain exporting issues that affect U.S. farmers and their customers.