Desired effect may not occur if farmers return to the grain over high prices
China's top corn-producing province is cutting the subsidy for farmers churning out the grain by 13 percent this year, as the Chinese government pushes to whittle down stocks of the commodity and encourage growers to plant other crops like soy.
Northeast China's Heilong-jiang Province will give corn growers 133.46 yuan ($20.30) per mu (0.067 hectares) of corn grown this year, compared with 153.92 yuan last year.
Subsidies for soy growers are significantly higher than corn at 173.46 yuan per mu. It is the first time the Chinese government is giving soybean farmers the so-called grower subsidy, after the country abandoned a three-year "target price" subsidy for soybeans linked to market prices.
But analysts said the move may not have the desired impact, with high corn prices this year expected to encourage many farmers to return to corn.
The most-active corn contract on the Dalian Commodity Exchange rose 0.12 percent to 1,678 yuan on Tuesday.
"Corn farmers can still make good money growing corn because corn prices are up a lot and the cost of renting land is much lower this year," said Zhang Dalong, an analyst at COFCO Futures.
China began to reduce its support for corn production last year in a bid to rebalance a huge oversupply with demand. Those efforts are expected to lead to the country's first corn deficit in years, forecast at around 4.3 million tons.
But China still has an estimated 180 million tons of idling and aging corn in warehouses, built up during a now-ended stockpiling program.
Initial efforts to encourage farmers to stop planting corn have seen output of the grain in Heilongjiang fall by around 12 percent in the 2016-17 crop year to 31.2 million tons, with acreage down 9.3 percent, according to the China National Grain and Oils Information Center, an official think tank.
But Zhang expects planting in Heilongjiang and other Northeast China provinces to recover in 2018, as farmers favor corn over soybeans for its lower growing and labor costs.
"Growing corn will still be more profitable, and to farmers in the northeast, corn is the easiest to grow," he said.
