April 27, 2011

 

 

In an effort to secure grain supplies, China will limit alcohol, biofuel and other non-animal-feed projects that use grain and edible oils as raw materials, China's top economic planner said Tuesday (Apr 26).

 

Corn is used to make non-feed products ranging from ethanol to starch and sweeteners, which consume about one-third of China's corn output. This consumption diverts supply from animal feed millers in the world's most populous country, raising the prospect of corn shortages, as consumption is expected to grow much faster than output.

 

The government will also limit corn starch projects with processing capacity of less than 300,000 tonnes a year, and eliminate those projects with annual capacity of less than 100,000 tonnes, the National Development & Reform Commission (NDRC) said.

 

Beijing has failed to halt an unprecedented expansion of corn processing industries, whose combined annual capacity has risen to almost 70 million tonnes in the marketing year ending September 30, said Shang Qiangmin, director of the state-backed China National Grain & Oil Information Centre (CNGOIC).

 

These industries are expected to consume about 50 million tonnes of corn in the current marketing year, or about 29% of total corn output in the 2010 calendar year, the CNGOIC said.

 

Beijing recently ordered banks to stop lending to corn purchasers, and it has cancelled tax breaks for corn processors to limit their expansion.

 

The NDRC said China will also limit soy-crushing projects outside of major producing areas, which include the northeastern provinces of Heilongjiang and Jilin and the Inner Mongolia Autonomous Region.

 

Soy crushers' capacity utilisation rates averaged about 50% last year, analysts said.

 

Total soy crushing capacity is expected to exceed 100 million tonnes this year, Luan Richeng, president of Chinatex Corp, the nation's third-largest soy crusher in terms of capacity, said last week.