April 20, 2011

 

 

China will limit corn consumption in non-feed sectors to ensure supply for animal feed mills and to help control prices, corn traders and local media reports said.

 

Excluding state stockpiling agencies, Beijing has asked banks to halt loans to companies that would have used the funds to buy corn for non-feed processing purposes, local media reported this week.

 

Such processing refers to industrial uses, including the use of corn as a sweetener and in alcohol. The government has released millions of tonnes of corn from stockpiles to reduce supply pressures, but China's corn prices have still risen about 17% since the start of October, when food inflation started to gain significant momentum.

 

Government's economic planners had written to banks and other financing corporations, requesting that they halt loans for non-feed processors until the end of June, according to media reports.

 

The government will limit the amount of corn available to such processors to their consumption volume in 2009, and encourage consolidation of the sector, the reports said.

 

In addition, China will suspend the value added tax deduction for corn purchases by processors in an aim to "curb the overly rapid development of the corn processing sector", said the country's Ministry of Finance on Tuesday (Apr 19). The suspension will be effective from Wednesday and last until June 30, said the ministry.

 

A sharp rise in corn demand has largely been due to processing needs, hence the industry - rather than corn's more traditional livestock consumers - is being targeted in the latest round of price controls, an analyst said.

 

China's corn output in the crop year ending September 30 is expected to reach around 168 million tonnes, slightly more than consumption of about 164 million tonnes, the USDA forecast this month.

 

Non-feed corn processing demand could reach 50 million tonnes in the current crop year, while feed demand could reach 100 million tonnes, according to research house Cngrain.com.

 

Non-feed corn use has been rising as a portion of total corn demand, to 29% from 11%, while use in animal feed production accounts for 61%, down from 74%, reports said.

 

The government has been taking other measures this year to cool food prices, including capping prices for edible oil and instant noodles.