Currently, corn fodder processing, cornstarch processing and corn ethanol production are all reporting losses. The capacity utilization rate has fallen to 46 percent in factories, a historic low.
Meanwhile, corn in storage in the region stands at 160.4 billion kg, accounting for 78 percent of the country's total.
"The northeast faces huge pressure to store more corn, and buying corn is putting great financial pressure on the central government," said Song Haihe, head of the Jilin branch of China Grain Reserves Corp. "This is the result of a snowball effect."
The rapid expansion has also harmed the rich black soil there as farmers apply more fertilizer to boost production. The average amount of fertilizer used has reached 434 kg per hectare, 1.93 times the national safety limit.
"BREAK THE VICIOUS CYCLE"
As urgency for change mounts, it is necessary to break the vicious circle, said Liu Xiaoran, an official with the China National Association of Grain Sector.
"The original purpose of government support for the corn industry was to help farmers, but now it is hurting them," Liu said. "The corn and corn processing sectors have become too reliant on government subsidies, which have disturbed the pricing mechanism for the products."
Liu added that instead of intervention, the government should let the market play the decisive role if it wants to stave off the crisis.
Chinese authorities are already taking action by letting the market play a bigger role.
Earlier this year, central officials conducted surveys about the policy of purchasing corn for state reserves in the northeast, which led to the policy change in September.
In June, the Ministry of Agriculture ordered local officials to decrease corn cultivation next year.
"Giving a bigger role to the market may cause farmers pain at the moment," Liu Xiaoran said. "But it's a pain worth having, in the long run."
?
