China's new subsidies for corn growers in the northern grain belt will encourage farmers to keep growing the grain, an official think-tank said on Wednesday, potentially threatening an attempt to bring output more in line with market demand. China will allocate 30 billion yuan ($4.51 billion) in subsidies to corn growers in four provinces next year, said the finance ministry on Tuesday, to replace a state stockpiling scheme that was cancelled earlier this year.
The subsidies, described as the first batch, would amount to around 130 yuan per mu (0.067 hectares) based on current estimates of corn acreage, said the China National Grains and Oils Information Center. "As the subsidy amount is rather big ... farmers' enthusiasm for selling grain will be quite high," the think-tank said in a daily report.
The subsidies include 4.58 billion yuan for Liaoning province, 7.26 billion yuan for Jilin, 11.57 billion yuan for Heilongjiang, and 6.63 billion yuan for Inner Mongolia. No subsidies were issued for growers in other provinces.
China, the world's second-biggest corn consumer, said in March it would scrap a years-long corn stockpiling scheme that had inflated local prices and left state warehouses chock full of grain, and instead allow markets to set prices for the 2016/17 crop. The gap that opened up between local and global prices also sparked a surge of cheaper imports that exacerbated the domestic glut. Letting prices fall was aimed at halting the imports as well as encouraging farmers to grow other crops such as soybeans to help the government sell down its massive reserves.
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