The U.S. drought is driving up corn prices and creating unease among buyers around the world. In many countries, however, there are concrete and constructive policy decisions that governments can make to mitigate the effects and help end-users cope with what is shaping up to be a challenging year. Taiwan is a good example. U.S. Grains Council Director in Taiwan Clover Chang shares his insights.
Under pressure from high corn prices, Taiwan's Council of Agriculture (COA) convened a meeting in late August. There have been three major outcomes:
• Feed Rice Allocation. The Agriculture and Food Agency under the Council of Agriculture (AFA/COA) will allocate 55,000 metric tons of feed rice to feed mills and livestock and poultry producers during the August-September period. AFA/COA had already allocated 92,400 tons of rice for feed use in January-August. This compares with 41,000 tons in 2007; 64,000 tons in 2008, none in 2009 and 2010, and 120,000 tons in 2011. The 2012 allocation will set a new record.
• Removal of Business Tax on Corn. The COA will recommend the Ministry of Finance extend for six months the current suspension of the 5 percent business tax on corn, from Oct. 6, 2012, through April 5, 2013. If this occurs, it will be the fifth time since March 2008 that this tax has been temporarily suspended.
• Safety Stock System for Corn. The COA is now evaluating the feasibility of establishing a safety stock system to buffer Taiwan against market disruptions.
Buyers in Taiwan recognize the United States is experiencing a severe but fortunately temporary situation. The readiness of the government of Taiwan to work constructively to help buyers through this difficult period is an important contribution to reducing short-term impacts and maintaining long-term confidence in international markets.
At the same time, the Council's Taiwan staff is working hard to reassure buyers that U.S. producers will continue to invest to increase production, that improving technology continues to drive the U.S. yield trend, and that the U.S. remains a reliable long-term supplier of feed grains. The market is working, and the United States will continue to have corn available for both domestic and export customers.