March 8, 2017 / 11:24 AM / 9 months ago

Major Chinese corn region seeks more financial aid from Beijing

BEIJING, March 8 (Reuters) - China’s second-largest corn-producing region has asked Beijing for more financial aid as farmers struggle with low prices and bulging stocks a year after the government ditched its decade-long buying policy and efforts to boost demand stumble.

Profits have fallen even after the central government doled out 39 billion yuan ($5.7 billion) of subsidies in 2016 to farmers in the northeast corn belt last year.

Beijing has tried to pass the financial burden of buttressing its grain farmers and major corn users to regional authorities, and analysts reckon government support will fall this year.

Local governments have issued subsidies to corn processors and feed makers, hoping to cushion farmers from reform shock.

But parliamentary delegates and analysts say it won’t be enough to offset the drop in prices and absence of a minimum purchase price.

“The corn prices are lower than what the policies intended, so I suggest we appropriately increase corn subsidies ... to protect corn farmers’ profits,” said Guo Naishuo, a delegate from Jilin to the National People’s Congress, China’s parliament.

Farmers in the northeast now make about 300 yuan less for each mu (0.06 hectare) of corn they grow than a year ago, said Xi Yinsheng, of the Research Centre for Rural Economy under China’s Ministry of Agriculture, the China Times reported.

Jilin’s woes illustrate the challenges for Beijing as it scrambles to cut a corn glut by inventing uses for the grain such as biodegradable plastics, ensure food supplies for its growing urban population and secure livelihoods of millions of farmers.

“With such huge stocks, we must think of ways to digest them in a couple of years,” Chen Xiwen, a leading agricultural policy adviser, told Reuters.

The end of the state reserve programme has left Beijing with about 230 million tonnes of corn, he said, equal to a year of demand. Most of it is too old to be used for human consumption.

One way is to promote the nation’s polylactide sector, which turns corn starch and cassava into biodegradable plastic products such as bags and plates, as well as boosting production of ethanol.

Others measures include using corn to make a sweetener called xylitol, and degradable films used in greenhouses, Chen said.

But so far, these fledgling efforts haven’t led to a big jump in consumption of the crop, experts said.

At the same time as the government is looking for new channels for its corn, it is urging farmers to cut corn acreage.

Corn acreage is set to fall by 0.7 percent each year in the five years to 2020 to reach 500 million mu (33.3 million hectares).

For its part, Jilin will reduce corn acreage by 300,000 hectares in 2017, according to its 2017 work report.

“Jilin farmers have been growing corn for several generations. If you don’t allow them to grow corn, what else can they grow?” asked Liu Ye, a member of China’s largely ceremonial parliamentary advisory body. He is also president of a major agriculture company in Jilin. ($1 = 6.9078 Chinese yuan renminbi) (Reporting by Hallie Gu, Sue-Lin Wong and Dominique Patton; Editing by Josephine Mason and Dale Hudson)

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