Friday, June 29, 2012

Policies to Restrict Domestic Corn Deep-processing Industry from Jan. 2011 to April 2012

From Jan. 2011 to April 2012, Chinese government has implemented a series of policies to inhibit the fast development of corn deep-processing industry, the second largest consumption field of corn, with an ultimate purpose to promote the healthy growth of the industry, according to CCM International’s June issue of Corn Products China News.

Generally, Chinese government regulates corn deep-processing market majorly through economic means (policy 2, 7, 8 and 9) and administrative means (policy 1, 3, 4, 5 and 6). For example, policy 7 and 8 indicate that the government restricts the development of grain fuel ethanol, leading to the decreasing profit of grain fuel ethanol. As a result, cellulose fuel ethanol has become more competitive than grain fuel ethanol, attracting more producers to newly build or ramp up their cellulose ethanol capacities. For example, COFCO Bio-chemical (Anhui) Co., Ltd., a nationally designated fuel ethanol producer with corn as raw material, tried to produce cellulose fuel ethanol by cooperating with Novozymes (China) Biotechnology Co., Ltd. in 2012. Hence, government's regulatory policies can effectively guide domestic corn market to develop towards the right direction.
In Guidance Catalogue for Industrial Restructure (2011 edition) (the Guidance Catalogue), some corn deep-processing products were restricted such as corn starch, vitamin C and vitamin B2. Besides, inferior production lines of some corn deep-processing products were indicated to be eliminated such as ethanol, citric acid, monosodium glutamate and corn starch, which are in terrible over-capacity. In general, the restriction and elimination of these products enforce their production to be concentrated in fewer and larger producers with better technologies and lower cost. Hopefully, the restructure and integration will help to make these products develop healthily and increase their competition power in global market. 

Nevertheless, not all products of corn deep-processing industry are restricted. According to the Guidance Catalogue, corn oil, minority amino acids (amino acids except for glutamic acid and lysine) produced by fermentation, new enzymes, polyols and functional fermented products are encouraged, because their supplies haven't meet their demands yet. With promising future, they have benefited their producers much. For instance, Shandong Longlive Bio-technology Co., Ltd. (Longlive Bio-technology), a main xylo-oligosaccharide producer in China, made a remarkable 41.74% gross profit margin in its xylo-oligosaccharide business in 2011, as showed in its 2011 annual report. To obtain more profits, Longlive Bio-technology is building a new xylo-oligosaccharide production line with the capacity of 6,000t/a.   
Overall, Chinese government will keep restricting the development of corn deep-processing industry in the future. Therefore, related corn producers need to improve the competitiveness of their products by strengthening the development of encouraged products by the government and so on. For instance, seeing the remarkable profit that Meihua Holdings Group Co., Ltd. has obtained from minority amino acids in 2011, Fufeng Group Co., Ltd. plans to expand its production lines of the products in the future, as mentioned in its 2011 annual report.
Source: Corn Product China News 1206

Content of Corn Products China News 1206:
China's export of MSG increases in 2011
Domestic output of HFCS increases by 28.3% in 2011
Chinese corn products Imp. & Exp. analysis in April 2012
Domestic prices of four key amino acids perform differently in June 2012
Market price of citric acid in China declines a little in June 2012
Longlive Bio-technology approved to produce bio-fuel ethanol
National standard of corn oil to be amended
Domestic threonine performs poorly in Q1 2012
Policies to restrict domestic corn deep-processing industry from Jan. 2011 to April 2012
Ukraine hopes to export corn to China
Chinese Minister of Agriculture supports the development of corn
Market price of home-made potato starch keeps low in June 2012

Corn Products China News, a monthly publication issued by CCM International on 20th of every month, reveals the driving force of news stories and deeply analyzes the influence of trends and dynamics on domestic and international corn deep processing industry.

About CCM International
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