June 15, 2007

  

China to place measures to curb corn demand

 

 

Lysine exports, along with starch and alcohol, may face higher taxes in the near future as China plans measures to curb corn demand, industry officials said.

 

China used to be a lysine importer but with the rise of the industry bigwigs such as Global Bio-Chem Technology Group Co Ltd , Xiwang Sugar Co Ltd and Fufeng Group, it has become a net exporter.

 

To curb corn demand, the government may start by curbing corn exports. China is unlikely to issue a second batch of corn export quotas after the quota of 1.5 million tonnes issued in April, officials said.

 

The corn processing industry is currently being targeted by the Chinese government in an effort to reduce corn demand and ease inflation. Cash corn prices have reached record highs in China despite a record harvest. First on the hit list would be corn processors without environmental certifications, officials said.

 

Remarks by Premier Wen Jiabao last month on controlling expansion of the industry is also confirming a trend that would see further tightening of regulations in the industry

 

Industrial corn demand has driven up corn prices which in turn prompted a hike in feed prices. The feed price increase is believed to have led to a significant increase in pork prices which fanned inflation and caused much public resentment. The Chinese government has said it would implement measures to curb prices.

 

Paradoxically, the government is cleaning up an industry that boomed partly thanks to its own making. In the past five years, China has been promoting the sector as it adds value to agricultural products.

 

It has been estimated that China's corn processing sector now consumes 20 percent of the country's annual production, triple the amount six or seven years ago.

 

Next on the government's clean up list would be the ethanol industry. While Beijing still wants ethanol output to be expanded, its has scaled down expectations, setting a targeted 3-million-tonne production by 2010 instead of the 5-million-tonne announced earlier. Still, this means a tripling of output from the current 1 million tonnes currently.

 

However, Beijing has also withdrawn tax rebates for ethanol exports this year, cutting off a thriving trade driven by high energy prices worldwide.

 

Beijing has also urged the country's four authorised fuel ethanol plants to gradually shift away from using corn as a raw material, and some companies are already in pilot projects to test alternative feedstock such as cassava.