April 13, 2007

Increased ethanol production to push up China corn prices further
 

Increased corn demand for ethanol production has heightened the need to expand the grain's output in China, and might lead to a further rise in domestic corn prices, warned China's Ministry of Agriculture.

Although the Chinese government allows a maximum of only three million tonnes of corn to be used in ethanol production, analysts believe that many small unlicensed ethanol producers converted as much as 16 million tonnes in 2006.

The jump in industrial demand for corn has pushed up its prices by up to 15 percent since the second half of 2006.

25 percent of the corn supply in China goes into producing mainly ethanol and starch, with the rest consumed as food or feed.

Domestic corn demand for ethanol production is expected to grow by 30 percent annually until 2010, compared with an expected rise of only 4 percent annually for corn demand from the livestock industry.

With currently limited growth in China's corn output and strong domestic demand, analysts expect a rise in corn imports mostly from the US.