China Taxes Grain Exports To Rein In Food Inflation
China
China Taxes Grain Exports To Rein In Food Inflation
China's Ministry of Finance has announced that select grain exports will be taxed for a one-year period starting yesterday (Jan. 1) in an effort to curb rising inflation and meet domestic grain demand. Export tariffs will be assessed on exports of oats (25 percent), wheat (20 percent), soybean meal (10 percent), and soybeans, millet and corn (5 percent). The policy move comes just 12 days after China scrapped a 13 percent export rebate on wheat, corn, soybean and their respective flour exports, and two weeks after the state sold 500,000 tons of corn from its reserves into the market in its latest measures to control inflation. Food prices, which account for one-third of China's inflation formula, registered an 18.2 percent increase in November 2007. According to official statistics, Chinese wheat and corn exports for the first 11 months of 2007 surged 130 percent and 87 percent respectively in volume terms.
South Korea is China’s primary market and the United States’ fourth biggest market for corn and wheat exports. Although Korea’s corn imports from the U.S. fell 29 percent through November and imports from China increased by 85 percent, the United States is still Korea’s largest corn supplier and China is No. 2. The United States dominates global corn production and exports, with 2007/08 production estimated at 353.69 million metric tons (MMT) and exports at a record 70.34 MMT. China is the second largest corn producer, at 153.4 MMT, but its exports are estimated at only 1.54 MMT. USDA estimates that about 70 percent of China’s 2007/08 corn production will be used for feed.
China is also the second largest wheat producer after the European Union, with 2007/08 production expected to total 106 MMT and exports at just 3 MMT. U.S. wheat production is estimated at 56.25 MMT but exports are expected to reach nearly 32 MMT. The United States is also Korea’s largest wheat supplier, and Korea’s imports of U.S. wheat increased 10 percent through November while imports from China, the second largest supplier, increased 309 percent.
In an effort to control speculation in principal foodstuff items in advance of the early February lunar New Year, China's Ministry of Commerce, which controls the strategic reserve of key foodstuffs such as pork and edible oil, announced plans to increase reserve sales of pork and oil to stabilize prices on Dec. 27. As of late December, Chinese pork prices in local currency terms, were 53 percent above prices in late 2006, according to Ministry of Commerce reports, and analysts now expect prices to stay high until the latter part of 2008. After a lull in the fall of 2007, pork prices resumed their upward drift and have slowly risen for the past 11 weeks. "It will be interesting to watch how pork prices behave in the month remaining before the beginning of New Year festivities," said Joel Haggard, vice president in USMEF’s Asia Pacific office. USMEF notes that China's pork price increases are taking place as the pace of the appreciation of the Chinese currency accelerates. The yuan broke through the 7.30 barrier (7.30 yuan = $1) for the first time on Jan. 2 as trading resumed after the holiday.
In another end-of-year move to stabilize the pork market, China introduced tax exemptions on income from investments in livestock and poultry production as part of its new Enterprise Income Tax Law (EIT). The new regulations came into effect yesterday, Jan. 1. The EIT also exempts taxes on investments in a number of other agriculture and forestry activities, including deep sea fishing, forestry and the production of grain and other food crops.
China
China Taxes Grain Exports To Rein In Food Inflation
China's Ministry of Finance has announced that select grain exports will be taxed for a one-year period starting yesterday (Jan. 1) in an effort to curb rising inflation and meet domestic grain demand. Export tariffs will be assessed on exports of oats (25 percent), wheat (20 percent), soybean meal (10 percent), and soybeans, millet and corn (5 percent). The policy move comes just 12 days after China scrapped a 13 percent export rebate on wheat, corn, soybean and their respective flour exports, and two weeks after the state sold 500,000 tons of corn from its reserves into the market in its latest measures to control inflation. Food prices, which account for one-third of China's inflation formula, registered an 18.2 percent increase in November 2007. According to official statistics, Chinese wheat and corn exports for the first 11 months of 2007 surged 130 percent and 87 percent respectively in volume terms.
South Korea is China’s primary market and the United States’ fourth biggest market for corn and wheat exports. Although Korea’s corn imports from the U.S. fell 29 percent through November and imports from China increased by 85 percent, the United States is still Korea’s largest corn supplier and China is No. 2. The United States dominates global corn production and exports, with 2007/08 production estimated at 353.69 million metric tons (MMT) and exports at a record 70.34 MMT. China is the second largest corn producer, at 153.4 MMT, but its exports are estimated at only 1.54 MMT. USDA estimates that about 70 percent of China’s 2007/08 corn production will be used for feed.
China is also the second largest wheat producer after the European Union, with 2007/08 production expected to total 106 MMT and exports at just 3 MMT. U.S. wheat production is estimated at 56.25 MMT but exports are expected to reach nearly 32 MMT. The United States is also Korea’s largest wheat supplier, and Korea’s imports of U.S. wheat increased 10 percent through November while imports from China, the second largest supplier, increased 309 percent.
In an effort to control speculation in principal foodstuff items in advance of the early February lunar New Year, China's Ministry of Commerce, which controls the strategic reserve of key foodstuffs such as pork and edible oil, announced plans to increase reserve sales of pork and oil to stabilize prices on Dec. 27. As of late December, Chinese pork prices in local currency terms, were 53 percent above prices in late 2006, according to Ministry of Commerce reports, and analysts now expect prices to stay high until the latter part of 2008. After a lull in the fall of 2007, pork prices resumed their upward drift and have slowly risen for the past 11 weeks. "It will be interesting to watch how pork prices behave in the month remaining before the beginning of New Year festivities," said Joel Haggard, vice president in USMEF’s Asia Pacific office. USMEF notes that China's pork price increases are taking place as the pace of the appreciation of the Chinese currency accelerates. The yuan broke through the 7.30 barrier (7.30 yuan = $1) for the first time on Jan. 2 as trading resumed after the holiday.
In another end-of-year move to stabilize the pork market, China introduced tax exemptions on income from investments in livestock and poultry production as part of its new Enterprise Income Tax Law (EIT). The new regulations came into effect yesterday, Jan. 1. The EIT also exempts taxes on investments in a number of other agriculture and forestry activities, including deep sea fishing, forestry and the production of grain and other food crops.