WEST DES MOINES, Iowa – Ever since China shuttered its ports to American corn and corn products last year over unapproved biotech traits found in some cargoes, questions have lingered on why exactly China opted for such a drastic response.
“Was it really the biotech event, or was that the excuse,” asks Iowa Farm Bureau Research and Commodity Services Director Dave Miller, “because China’s domestic corn support program supports corn at about $9.50 per bushel.”
Miller points out that wasn’t much of an expense when corn prices were a little higher.
“Now, when U.S. corn was $7 per bushel, it didn’t cost them very much to do that internal support,” he explains, “because it cost a buck per bushel to get corn to China from the U.S., so it was only costing them maybe a dollar a bushel to do an internal support at that price, and it was really stimulating corn production in China.”
Now, Miller says corn prices in southern Iowa are around three dollars; a far cry from the much higher prices that are more economical for China’s support system.
“When you have a $3 corn market, it will be very interesting to see how long China maintains that,” says Miller. “China had very large corn stocks, and it could be that the shut-off of the export flow was an opportunity for the government to dump a lot of these very high-priced corn stocks that China had, and to force their domestic customers to use those. I suspect that as soon as those stocks get drawn down, we’re going to find U.S. corn flowing back to China.”
For more on the price of corn at home affecting China’s domestic support policies, click on the audio player above.