China's grain reforms to boost depressed corn processing industry

Fri Apr 1, 2016 4:57am EDT
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By Niu Shuping and David Stanway

BEIJING, April 1 (Reuters) - China's plan to let the market set corn prices is bad news for international grain exporters, but should boost the country's struggling corn processors that use the grain in products ranging from food additives to paper and textiles.

New demand from corn processing companies, as well as the feed and ethanol industries, will be vital to help China start cutting the 250 million tonnes of corn reserves built up under stockpiling policies, or more than the country can consume in a year.

In its biggest grain reforms in a decade, China said this week it will stop stockpiling corn and halt price support schemes, narrowing the gap between international <0#C:> and local prices <0#DCC:> and encouraging the use of local grain rather than imports of cheaper substitutes, such as sorghum and the ethanol byproduct distillers' grains (DDGS).

Food processors use corn to make starch, syrup and alcohol, but China's corn starch industry has been running losses over the past three years, with more than half of its capacity lying idle.

"It is good news for the industry," said Fan Chunyan, secretary general of the China Corn Starch Association

"More companies would raise production and become profitable and some companies may be able to export their products," said Fan, adding that utilisation rates could recover to about 70 percent, up from as low as 40 percent in recent years.

Corn starch is used to make thousands of products, including the food additives lysine and citric acid, which China once was the world's largest exporter, as well as corn syrup, which can replace natural sugar in the production of soft drinks and cakes.

Major players in the industry include COFCO Co Ltd, Global Bio-chem Technology Group Co. Ltd and the Xiwang Group.   Continued...