Critics of genetically modified organisms argue the technology poses risks to public health and the environment, while advocates say such fears have not been scientifically proven and that high-yielding genetically altered crops would help ensure food security as the world’s population grows.

Although relatively few people signed the letter, it marks a rare example of open opposition to state-supported corporate strategy in a nation where the government often clamps down hard on any criticism.

It also underscores fears among some of the public that the government is gearing up to gradually loosen laws that prevent the cultivation of any GM varieties of staple food crops, with Beijing already permitting the import of some GMO crops for use in animal feed.

The US$43 billion all-cash deal unveiled in February is the largest foreign acquisition ever by a Chinese firm as China is looking to secure food supplies for its population. Syngenta has a portfolio of top tier chemicals and patent-protected seeds, many of which are genetically modified.

“The acquisition of Syngenta and the promotion of its genetically-modified and agro-chemical agriculture in the country would destroy the country’s own agriculture and food security,” the protesters said in the letter, seen by Reuters. They argue GMO strains would contaminate Chinese staple crops.

“ChemChina must immediately stop the suicidal acquisition from causing a disaster to the Chinese nation.”

Syngenta did not respond to requests for comment. A ChemChina spokesman said he had heard about the letter and that the company was waiting to learn more about it.

Yang Xiaolu, one of the protesters on the list, said the letter was handed over late last month to the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), which overseas companies owned by the central government.

A SASAC spokeswoman said her office had not yet seen the letter, but was looking into the matter.

Yang, a long-time anti-GMO activist, is also among the three plaintiffs who were taking China’s Ministry of Agriculture to court in April last year in a bid to make public a toxicology report supporting the approval of Monsanto’s popular weed killer.

Reuters was unable to verify other names listed on the anti-GMO letter.

China’s commerce ministry spokesman Shen Danyang said in February that the ministry supported the acquisition which would help secure global food supply.

The protest comes amid worries that Beijing is losing control over the supervision of GMO technology.

Last month, agriculture minister Han Changfu admitted that GMO corn was illegally grown in some parts of the country, but found “no large areas of illegal planting” after Greenpeace said a majority of samples taken from corn fields in 5 counties in Liaoning province, tested positive for GMO contamination.

— Reporting for Reuters by Niu Shuping and David Stanway.

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China announced last week it will stop its corn stockpiling program and allow markets to set prices — a move that should transform the agricultural landscape as farmers shift to more lucrative crops like soybeans, rice and peanuts.

Rising demand for a protein-rich diet in China has since 2001 triggered a sixfold jump in imports of soybeans, which are crushed to make soymeal, an animal feed ingredient, and cooking oil.

Higher output in China, the world’s top soybean importer, will hit farmers in top producers Brazil, the U.S. and Argentina. The trio have presided over a soybean boom, helping nearly double world production over 15 years.

“We calculated and to grow soybeans would give better returns than corn which gives no profit after the price drop,” said Wang, who has grown only corn on his 16.5-acre farm for years in Hule village in Heilongjiang.

“Soy prices have picked up and with government soy subsidies, we may be able to make 700-800 yuan (C$141-$161) per hectare,” said Wang, adding that around a third of farmers in his village had plans to shift to soy.

Wang said farmers did not know what subsidies Beijing would provide instead of a guaranteed price if they grew corn, but he was confident corn prices would fall.

In 2016, China’s soybean output is expected to rise by up to two million tonnes and increase faster in future years with improved seed technology and a bigger acreage, analysts and traders said.

“Many farmers plan to shift to grow rice and peanuts, about 10 per cent of the farmland would be shifted to soybean,” said Wang Fuqing, head of the Hule Modern Agricultural Machinery Co-operative.

China’s support for corn saw the area under cultivation hit 37 million hectares last year, up from 23 million hectares in 2001, according to U.S. Department of Agriculture data.

In contrast, soybeans was grown on 6.8 million hectares in 2015, down from 9.3 million hectares 15 years ago.

“We know that soybeans and corn compete for acreage, so China’s support for corn prices pushed all those soybean acres into corn as it made more profit to grow corn,” said Adam Davis, head of commodities at Merricks Capital, a Melbourne-based agricultural fund.

“If it goes back to free market you could certainly see acreage go back to soybeans.”

Farmers are expected to make a bigger shift next year as corn falls nearer international prices. Corn has traded at an almost 50 per cent premium to world prices in China.

A shift of one to two million hectares to soybeans from corn would be the equivalent of a month’s soybean imports for China, said Ken Morrison, a former Cargill executive who publishes a commodity newsletter.

“I think the attention to the impact on global corn is overdone, and I think the attention to the implications of what it will mean to Chinese soybean production is under appreciated,” Morrison said.

Cotton shows the way

China, which ended price support for cotton in 2014, is forecast to see cotton acreage decline to 3.4 million hectares in 2015-16 from 5.5 million hectares in 2011-12, USDA data shows.

Cotton imports have dropped while the gap between international and domestic prices has narrowed since Beijing stopped paying prices well above the global market.

There could also be scope to improve soybean yields, including by using genetically modified organisms. Though Beijing has been cautious so far, ChemChina’s US$43 billion purchase of Swiss seeds and pesticides company Syngenta could bring Chinese planting of GMO soybeans closer.

China produces 1.8 tonnes of soybeans per hectare, well below the 3.2 tonnes of output in the U.S.

Boosted by GMOs, annual global soybean output has jumped nearly two-and-half times to 319 million tonnes since 1980.

Flood of DDGs

A move to liquidate massive corn stockpiles will also disrupt meal and vegetable oil trading in China and Asia, said grains analyst Roy Huckabay at Chicago brokerage the Linn Group.

China is sitting on close to 250 million tonnes of corn, enough to fill Beijing’s Bird’s Nest stadium around 34 times.

If lower-quality grain from state reserves is processed for ethanol, the market would be flooded with byproduct distillers dried grains with solubles (DDGs), he said.

Some farmers were taking a cautious approach before switching crops, said a local government official at Tailai county in Heilongjiang.

“Many farmers are holding a wait-and-see attitude because some are still hoping that corn prices may rise again and they are waiting to see how much subsidy the government offers.”

— Reporting for Reuters by Naveen Thukral in Singapore and Niu Shuping in Beijing. Additional reporting for Reuters by Tom Polansek and Karl Plume in Chicago.

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The government will instead subsidize corn growers and encourage commercial firms to buy grain from farmers at market prices, the State Administration of Grain said in a statement on Tuesday.

The new policy, which marks the biggest reform in China’s grains sector for a decade, is aimed at improving quality and efficiency in its agricultural sector as part of the country’s “supply-side reform.”

But it could prove costly for Beijing, potentially leaving it with huge financial losses as falling prices devalue massive stockpiles that hold over half the world’s corn supplies.

And as domestic prices start to shift in line with international markets, Chinese demand for imports of corn and corn substitutes such as sorghum, feed barley and distillers’ grains is expected to tank, hitting major suppliers such as the U.S. and Australia.

“We hope the new reform would let the market play more of a role in the formation of prices,” Liu Xiaonan, a deputy director with the National Development and Reform Commission (NDRC), was quoted as saying in the statement.

The new policy will take effect in the world’s No. 2 corn consumer from the 2016-17 marketing year that starts in October.

“Imports after autumn would be very difficult and could come to a halt,” said Li Qiang, an analyst with commodity advisory Shanghai JC Intelligence Co. Ltd. (JCI).

“Given the market-oriented reform of domestic corn prices, it is possible that China would be able to export both corn and corn products.”

Beijing’s nine-year-old stockpiling system, designed to support its huge rural workforce, has artificially lifted corn prices around 30-50 per cent above global markets, triggering a record volume of imports of corn and corn substitutes in 2015.

Government officials signalled the policy change last month. Chen Xiwen, deputy director with the Communist Party’s Central Rural Working Leading Group said the move would make domestic corn prices cheap enough to deter imports.

The step was also flagged over the weekend by local television, and has already driven down domestic corn prices.

The new-crop corn contract on the Dalian Commodity Exchange shed about two per cent in the Tuesday morning session after falling over three per cent the day before.

Massive state sales loom?

After years of stockpiling coupled with weakening domestic demand, the government has been saddled with about 250 million tonnes of corn in its reserves, more than the country can consume in a whole year, with the quality of the stored grain deteriorating.

The government is likely to sell more than 40 million tonnes from stockpiles this year, possibly starting from next month, with prices potentially below market price, said JCI’s Li.

“Traders will be watching developments closely as the selldown of Chinese reserves will impact demand for U.S. corn,” said Tobin Gorey, director of agricultural strategy at Commonwealth Bank of Australia.

Government hopes that the policy will cut corn production could be dashed in the short term, however, as many farmers have already purchased seeds ahead of the planting season that starts next month, analysts said.

“Farmers may not reduce acreage as much as the government expects. Corn could still be in surplus during the autumn harvest,” said an analyst with an official think-tank, who declined to be identified due to the sensitivity of the issue.

China has already abolished stockpiling in cotton, soybeans and rapeseed, and the Tuesday statement said it would also look into reforming wheat and rice, the two remaining staple food commodities subject to minimum purchase prices set by the government.

— Reporting for Reuters by Niu Shuping and David Stanway in Beijing; additional reporting by Colin Packham in Sydney.

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But some traders say the real reason for a higher standard that may slow Chinese imports is the country’s large rapeseed oil stockpiles.

Reuters reported on Tuesday that China’s quarantine authority, AQSIQ, told the Canadian Food Inspection Agency (CFIA) it would allow dockage of no more than one per cent foreign material in Canadian canola shipments as of April 1.

The current allowable dockage range is two to 2.5 per cent. Foreign material can include seeds of other plants or straw.

“We’re at a stage of scientific disagreement — that really is the issue at its heart,” said Patti Miller, president of the Canola Council of Canada, whose board includes exporters Cargill, Archer Daniels Midland and Richardson International. “We’re not aligned on the results of the last scientific study that we did.”

The countries have collaborated for years on research around blackleg, after China raised concerns in 2009. They have disagreed in the past year about potential blackleg transmission risk to Chinese farms through foreign material in canola shipments, Miller said in an interview.

The Canadian industry sees no significant risk, Miller said, adding that she could not release research results that are in dispute.

AQSIQ declined to comment. The agency’s letter to CFIA this week shows that it wants a resolution, but the parties are not done talking, Miller said.

The tougher standard will be difficult to meet, and make seed cleaning more expensive, possibly discouraging future sales, exporters say.

China is the world’s largest consumer of edible oils.

The stricter dockage standard allows China to work through high rapeseed oil stocks for the next year or two, an executive with a major Chinese buyer said.

Industry analysts estimate China’s rapeseed oil stocks at 5.5 million tonnes.

China subsidizes its farmers’ production, resulting in imports sometimes being cheaper than domestic supplies.

Importers are unsure what to do with cargoes scheduled to arrive after April 1, the Chinese buyer said.

Miller said she didn’t know how China’s new standard would affect sales that are already booked.

— Rod Nickel and Niu Shuping are Reuters correspondents in Winnipeg and Beijing respectively.

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In its latest move to boost a sector that has struggled with the world’s most expensive domestic corn, the government is preparing to slash state support prices by another 10 per cent to 1,800 yuan (C$376) per tonne for 2016-17, according to three sources. That would follow previously announced cuts for the crop year that began in October.

Cheaper local prices could sap appetite for imports from processors in the world’s No. 2 corn consumer behind the U.S., a move that could weigh on world prices and hurt corn exporters from the Americas to Ukraine.

Grain processors make products ranging from animal feed to sweeteners and ethanol.

A cut in prices could also stifle demand for corn substitutes such as sorghum, distillers grains (DDGS) and barley, which saw record Chinese imports of over 30 million tonnes in 2014-15.

“The government has to reduce the price, given its massive stocks and as domestic corn prices are still much more expensive than imports,” said Qian Jianjun, an analyst with Beijing Orient Agri-business Consultant Co. Ltd.

Beijing could also offer freight subsidies to animal feed mills in the south of the country that ship corn from the northeastern growing belt, two of the sources said. They did not specify when this could happen.

The finance ministry as well as the National Development and Reform Commission did not respond to requests for comment.

The three sources, who have direct knowledge of the matter, said Beijing may announce the new corn price cuts early next year before planting starts in March.

“Imports of corn and corn substitutes could fall more than we earlier expected, dropping 50 per cent or even more from last year,” said an analyst with an official think-tank.

Beijing has been forced to gradually pull away from its controversial policy of supporting farmers through buying corn for national reserves, as stocks are expected to have ballooned to 200 million tonnes by April next year — equivalent to over a year of the country’s consumption.

Higher local prices driven by the stockpiling mean that mills and refiners have lost cash and racked up debt, with as much as 60 percent of China’s processing capacity shut over the past three years, according to refinery sources.

Lifeline?

In an earlier step to offer refiners a lifeline, Beijing in September cut state support prices for the first time since 2008. Corn refineries in the northeast have also been offered subsidies for buying local grain.

Those steps helped narrow the gap between domestic and imported grain prices to a difference of around 20 per cent, but have not been enough to erode stocks or encourage broad investment from the animal feedstock or sweetener sectors.

Although at least one company has taken advantage of cheaper raw material prices: Global Bio-chem Technology Group Co., Asia’s largest corn refiner, restarted its idled corn sweetener and lysine plants last week, an official told Reuters.

The lysine plant in the northeast province of Jilin will reach full capacity of 500,000 tonnes per year by the end of November, said the official, who declined to be identified as he was not authorized to speak with media. Lysine is an animal feed ingredient.

However, tepid demand for animal feed will stymie efforts to boost many corn processors. Some poultry farmers’ flocks are recovering from bird flu and China’s culling of its hog herds has depleted stocks.

Meng Jinhui, an analyst with COFCO Futures Co. Ltd., said corn demand would not return to the record highs seen in 2012 of 120 million tonnes “any time soon.”

— Reporting for Reuters by Niu Shuping and David Stanway in Beijing.

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After years of excessive cultivation and bumper grain harvests, China is facing severe shortages and soil pollution, the People’s Daily reported, citing a document from the Party’s Central Committee on its 13th five-year plan.

“To implement an arable land fallow and rotation system in some regions will benefit land conservation and sustainable agricultural development,” according to the document issued by President Xi Jinping.

The programme would help balance the grain supply, boost farmers’ incomes and reduce the government’s financial burden in storing grain, it said.

With China holding ample grain stocks and surplus global supply, leaving some farmland unseeded should not cause any shortages, the document said.

Agriculture consumes the most water in China, using more than 340 billion cubic metres a year or about 55 percent of the supply, the water resources bureau said last year.

But some of China’s top grain-producing provinces, including Shandong, Henan, Hebei and Liaoning, are water scarce, say experts, and others are as dry as Jordan and Oman.

And ongoing urbanization and industrial development mean water consumption will continue to rise even as climate change exacerbates its scarcity.

China is already planning to cut its corn acreage in 2016 and encourage farmers to grow other crops, as the country comes under pressure to reduce huge stocks of the grain.

Wheat farmers in the northern province of Hebei, which is suffering severe underground water shortages, have also been encouraged to fallow land or switch to less water-intensive crops such as alfalfa, the local government said last year.

Areas with groundwater depression, heavy-metal contamination and severely degraded ecosystems should be the focus for the trial system, said the document on the five-year plan.

The party document also reiterated the country’s grain self-sufficiency policy, particularly in the staples wheat and rice.

“We will raise grain productivity to ensure basic self-sufficiency in cereals and absolute security in staple food supply,” the document said.

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That policy, in which grains are bought at artificially high prices in order to boost rural incomes, has encouraged farmers to produce too much, and China should rely on market signals to enable output to match demand, said Chen Xiwen, who heads the Communist Party’s rural policy group.

“We will draw on our experience from the introduction of target prices for soy and cotton…, let the market play a leading role in the formation of prices and give correct market information to farmers, so they can produce based on the needs of the market,” Chen told a news briefing.

Last year Beijing scrapped its cotton and soybean stockpile schemes, switching to direct subsidies to farmers to cover the gap between a target price and the market price, but it kept the stockpile policy for grains, sugar and rapeseed.

The system has driven domestic prices to artificially high levels, with corn about 40 per cent higher than on the global market. Downstream industries have been shifting to cheap imports, leaving the expensive domestic crop to the state reserve.

Sinograin, the state stockpiler, purchased a record 125 million tonnes of grain in 2014, the official Xinhua news agency said on Monday.

Analysts estimated the country’s corn stocks could reach more than 120 million tonnes in 2014-15 after three years of bumper purchases.

“It’s a big problem where we should store new purchases this year because the silos in some areas are already full,” Chen said.

He said Beijing would continue to impose strict controls on imports of grain, cotton and sugar in order to ease the oversupply.

Last October, Vice-Premier Wang Yang said the country would seek to control imports and crack down on smuggling in a bid to cut oversupply, with record stockpiles leading to rising storage problems.

The world’s top cotton-consuming country will slash cotton import quotas for 2015 to boost demand for domestic fibre, a government official said last year.

China will also try to control sugar imports by requiring buyers to register shipments in excess of quotas, allowing it to monitor the flow of cheap imports more closely.

Shipments delivered in excess of quotas agreed with the World Trade Organisation should attract higher tariffs, but local authorities have not been implementing the rules strictly enough, Chen said.

China’s grain imports are expected to plummet this year, with the government determined to sell off as much of its bulging reserves as possible before it grants mills permission to buy overseas.

— Niu Shuping and Dominique Patton are a reporter and ag commodities correspondent respectively for Reuters in Beijing.

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In previous years, private mills were normally allocated grain import quotas in January, allowing them to start ordering cargoes immediately, but it could take several more months this year as Beijing revamps its quota allocation system in a bid to reduce stockpiles, analysts said.

While overall import quota volumes are unchanged, the amount allocated to individual mills will depend on how much they are prepared to buy from state reserves.

“Corn imports will surely decrease this year as the reserve-linked quota allocation system will help the government get rid of stocks while discouraging mills from importing,” said Feng Lichen, a senior analyst with industry portal yumi.com.cn.

Quotas will be allocated once mills have paid for and received grain bought at auction and the whole process could stretch out for more than two months.

Total corn import quotas amount to 7.2 million tonnes, but 60 per cent of that, earmarked for state-owned entities, will not be issued at all in a bid to encourage state reserve sales, Feng said.

But the government could struggle to issue the remaining 40 per cent to private mills, with many reluctant to buy reserves that are often low in quality and far too expensive, he added.

In order to obtain quotas, some mills pay more than 240 yuan (C$46) per tonne higher than the market price for state corn stored in northeastern provinces.

During the first round of auctions from Jan. 6-8, only 36 per cent of the corn on offer was sold, amounting to 1.7 million tonnes. The remainder will go on sale again next week.

“Mills are motivated to profit from cheaper imports, but the price gap changes every day and they are not sure when they can get the quotas,” said another industry source. “They face potential risks if overseas prices rise.”

Auctions for state wheat reserves have proved more popular, with flour mills desperate to get hold of import quotas and gain access to higher-quality produce, which is in short supply in China.

This week, the government sold 83.6 per cent of the two million tonnes on offer at an average price of 2,569 yuan (C$491) per tonne for white wheat and 2,635 yuan for mixed quality wheat, according to results posted by the National Grain and Oil Trade Centre.

COFCO, a state-owned trader, is also sourcing high-quality wheat overseas and bought two cargoes earlier this month, industry sources said.

— Niu Shuping and David Stanway report for Reuters from Beijing.

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China, the world’s biggest wheat producer and consumer, has seen output climb to record levels in recent years, but it faces a shortage of the high-protein wheat it needs to meet growing appetite for noodles, bread and other baked products as incomes rise.

“Hard red spring wheat is in extremely short supply here in the domestic market because China’s own production of high-quality wheat was not satisfactory despite higher output,” said an analyst with an official think-tank who declined to be identified.

More demand for high-protein wheat could bolster prices for spring wheat traded on the Minneapolis Grains Exchange, which have risen 2.2 per cent this week, as well as supporting hard red winter wheat futures in Kansas, up 1.5 per cent.

China has bought about 120,000 tonnes of hard wheat in the past few days, European traders said on Monday. The origin is unclear but may include some Australian and U.S. wheat.

“We are seeing more business being done to China in containers and bulk than we have seen in a long time,” said one grains trader in Sydney.

“The Australian dollar has weakened and it is attracting business,” he added. The Aussie hit its lowest in over five years on Monday.

“There is plenty of feed wheat or average quality around, but if you are looking for high-protein wheat you will have to pay a premium,” said a Singapore-based trader.

Keeping control

China exerts control over import volumes by issuing quotas that limit how much wheat buyers can take from overseas. In the coming weeks, it is expected to issue a 2015 quota-level unchanged from last year’s 9.6 million tonnes.

Private mills are likely to bid keenly for the 10 per cent they are expected to be allocated.

China’s overall wheat imports are forecast to fall by around 60 per cent to about three million tonnes in 2014-15 from a year ago, China National Grain and Oils Information Centre has estimated, thanks to all-time high production.

In addition to higher output, China’s overall appetite for wheat is likely to take a hit as authorities suspend buying for state reserves after a bumper harvest refilled stocks.

China’s wheat imports more than doubled to 6.77 million tonnes in 2013-14 from a year after adverse weather damaged crops in key producing regions.

But the country is expected to churn out a record 126 million tonnes in 2014-15, up from 122 million tonnes a year ago, the National Bureau of Statistics has said.

Beijing will offer two million tonnes of domestic wheat from state reserves this week.

— Niu Shuping and Naveen Thukral report for Reuters from Beijing and Singapore respectively.

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The low-tariff quotas, which are sanctioned under China’s membership of the World Trade Organization, are allocated to state-owned and private firms in the world’s top grain consumer.

With Chinese grain prices among the highest in the world, these import allocations have become a cash cow for well-connected companies.

Fang Yan, a deputy director of the National Development and Reform Commission’s (NDRC) rural economy department, told Reuters this month there would be changes to the import quota allocation system but declined to elaborate.

But industry sources say proposed changes include bringing in a more transparent tender process for quotas, while Beijing is also looking into awarding quotas only to companies that agree to buy grains from state reserves.

“The system allows officials to trade their power for money. Companies are able to pay bribes to obtain quotas, while mills and other end-users that are in need of cheaper imports are shut out,” said Ma Wenfeng, an analyst at Beijing Orient Agri-business Consultant Co. Ltd.

Experts say the process of obtaining quota allocations is opaque and complex. The NDRC, which issues the quotas, does not publish the names of firms receiving import allowances or volumes.

Ma’s firm, which consults the government, has proposed the current scheme be replaced by a public tender process that allows firms to bid for quotas.

Delays issuing import quotas

Plans to overhaul the quota system have already led to delays in issuing 2015 grains and cotton import quotas, which are typically announced by the end of September each year.

“The process is definitely going to be changed,” said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd., a private consulting firm, adding that a series of corruption scandals surrounding the NDRC underscored the need for change.

The NDRC, the nation’s top economic planner, has been a target of investigations since President Xi Jinping launched an anti-graft campaign in late 2012. The body’s former deputy head Liu Tienan was sacked in September for taking 35.6 million yuan (C$6.6 million) in bribes.

An investigation also found 11 officials in various departments of the NDRC taking huge bribes, China’s Supreme People’s Procuratorate told state media last month.

According to Beijing’s WTO pledge, annual wheat import quotas are capped at 9.6 million tonnes, corn at 7.2 million tonnes, rice at 5.3 million tonnes and cotton at 894,000 tonnes. State-owned companies are given the bulk of the allowances, with the rest distributed amongst private traders.

Imports under the WTO quota have low tariffs of just one per cent, while to protect its farmers China places higher duties on shipments above that fixed volume. In the case of wheat, firms without import quotas could end up paying tariffs as high as 180 per cent.

The gap between the global price of agricultural commodities — with Chinese cotton prices, for example, 40 per cent more expensive than imports — has encouraged a black market where companies sell their quotas for a profit.

Companies with cotton import quotas were selling their allocation to other processing firms for as much as 4,000 yuan (C$742) per tonne, according to a Chinese media report in March, citing the China Federation of Industry and Commerce.

Struggling with huge grain stocks, Beijing is also considering linking the WTO import quotas to purchases from the state reserves, said a manager at an animal feed mill, which was allocated import quotas this year.

The manager said discussions were under way for feed mills to buy 10 tonnes of grains from the state reserve in exchange for a tonne of import allowances.

“That means private feed mills will need to buy a total of 28.8 million tonnes of expensive state corn in exchange for the import quotas. That will help to cut state reserves,” said the manager, who declined to be identified as he was not authorised to speak to the media.

China does not publish its grain reserves, but corn stockpiles over the past two years are estimated by traders to have increased to nearly 100 million tonnes, or more than half of the country’s annual consumption.

— Niu Shuping and Fayen Wong report for Reuters from Beijing.

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