August 21, 2006

China warns of overcapacity in corn processing industry

Rapid expansion in China's corn processing businesses could lead to overcapacity, a government official said in a report on China National Grain & Oils Information Centre's website Friday (Aug 18).

"China's corn processing enterprises may suffer from overcapacity as their pace of expansion is too fast," Li Xirong, an official with the Research Office of the State Council, China's cabinet, was quoted as saying.

China is one of the world's biggest corn producers but consumption of the grain by industrial enterprises falls short of the country's processing capacity.

According to the CNGOIC, corn consumption by industrial enterprises in China will reach 30 million tonnes this year, up from 26.5 million tonnes last year.

China's corn processing capacity hit 50 million tonnes by the end of 2005 and is expected to rise to 70 million tonnes in 2006 and 85 million tonnes in 2007, the CNGOIC added.

About 10.8 million tonnes of corn a year is used to make ethanol, a fuel increasingly used in cars in China, and demand for the fuel has led to several new corn processing plants.

"We should use other biomass materials rather than corn to make ethanol," Li said.

China's total corn output this year is expected to reach 142 million tonnes with well over half of that used for animal feed.