March 4, 2008

 

Fuel ethanol targets to drive China as net corn importer in 2008

 

 

China, the world's second largest corn producer, is anticipated to become a net corn importer this year due to its ambitious fuel ethanol demand.

 

Presently, grain accounts for about 80 percent of the country's bio-fuel feedstock, and consumers are faced with increased competition for limited domestic resources.

 

Although China can still meet its own grain demand for the moment, there is a tight balance that could easily be thrown off, analysts said.

 

China homes 20 percent of the world's population, yet it only has 7 percent of the global farmland.

 

By 2010, China projects to consume 6.7 million tonnes of blended ethanol fuel gasoline and 11 million tonnes of biodiesel-blended diesel annually, which would meet 10 percent of forecasted demand for transport fuel.

 

The country started promoting corn-based ethanol in 2001, when its corn production was booming, and net corn exports increased from 10.47 million tonnes in 2000 to a high of 16.4 million tonnes in 2003.

 

After peaking in 2003, imports began to slide rapidly. In 2007, China's corn exports reached 4.8 million tonnes but only due to the fulfilling contracts signed in 2006.

 

Consumption in 2008 is estimated at 141.5 million tonnes, of which nearly two-thirds is for animal feed.

 

The USDA said China's state corn stockpiles are around 35 million tonnes. However, given China's aggressive state auction policy designed to stabilize market prices, this figure may be optimistic.

 

If China becomes a net corn importer this year, the impact on the domestic and global price will be dramatic, analysts said. Corn prices could go up US$6 per bushel, from current US$5 a bushel.