February 6, 2007

 

China's corn processing industry will keep corn prices high this year
 

 

The momentum that propped up corn prices in China last year has not been sustained since the start of 2007 but would climb and stay high for the rest of the year, analysts said.  

 

China's corn prices last year had grown strongly due to shortage in corn stocks, rising demand and sharp price hikes of corn on the international market.

 

The growth of corn production will follow closely that of demand growth this year, and the domestic corn market is forecast to be basically balanced, with no sharp fluctuations expected, analysts said.

 

The general price trend for corn would be decided by supply and demand this year, and prices are expected to be kept high.

 

According to the State Grain and Edible Oil Information Centre, China's planting area of corn is 27.35 million hectares this year, 1.1 percent more over that of last year.

 

Weather permitting, the total corn output of China is estimated to reach 145 million tonnes in 2007, up three million tonnes or 2.1 percent over 2006.

 

Analysts said price hikes experienced in the second half of last year was mainly because of the tight supply in the period and the rapid development of the processing corn industry in the country.

 

China's average purchase price of mixed corn was RMB 64.55 per 50 kg in December last year, up 0.65 percent, and the selling price was RMB 69.3, up 0.61 percent.

 

The average price of corn in major corn production regions was up 0.76 percent.

 

The development of the deep processing corn industry is the major factor affecting the prices of corn in China as the country is now in a stage of rapid growth of corn deep processing of starch, fuel ethanol, and alcohol which in turn led to a strong corn demand.

 

According to statistics, China's industrial corn consumption was about 13.80 million tonnes in 2000. This has nearly doubled to 25 million tonnes by 2005. The consumption in the first half of 2006 alone hit 15.60 million tonnes.

 

The total consumption of corn by industrial sector is expected to reach more than 30 million tonnes in the 2006-2007 period.

 

China is the second largest exporter of cornstarch in the world, its output of 9 million tonnes in 2005, consumed 14 million tonnes of corn. Corn consumption for cornstarch was increased to 16 million tonnes in 2006, up 16 percent.

 

China approved four fuel ethanol production bases in 2005, with production capacity of 1.02 million tonnes a year. The 11 Five-Year Plan (2006-2010) stipulates a five-fold increase in China's output of fuel ethanol. 

 

China now consumes 3.30 million tonnes of corn for production of fuel ethanol, accounting for 2.3 percent of the total corn output, which is expected to reach 16.50 million tonnes by 2010, 12 percent of the total.

 

Trial operation of use of ethanol-added fuel has been expanded to China's five provinces and 27 cities across China.

 

China's alcohol production (including fuel ethanol) in 2005, consumed 8.90 million tonnes of corn, accounting for nearly half the total industrial corn consumption.

 

According to the State Grain and Edible Oil Information centre, China's planting area of corn is estimated to be 27.05 million hectares in 2006, and the corn output is 142 million tonnes, higher than the 26.36 million hectares and 139 million tonnes in the 2005-2006 year.

 

The country's corn exports fell 64.3 percent on-year in 2006, according to customs statistics.

 

According to a report on global supply and demand by the USDA, China's corn output was 139.36 million tonnes in the 2005-2006 planting year, and corn consumption was 137 million tonnes, up six million tonnes on-year.