Can Ethanol Cure China's Corn Indigestion?

by Julien Hall, Samar Niazi, and Gao Xiaojuan (Platts Commodity Pulse VIDEO) China's corn stockpiles, built up over the past couple of years, have reached problematic levels. In this video, S&P Global Platts Agriculture editors Julien Hall, Samar Niazi and Gao Xiaojuan examine how supply is affecting corn prices in China, the disconnect between government and market estimates on production forecasts for 2017, as well as the potential role of corn-derived ethanol in easing the country's corn oversupply. READ MORE and MORE (Business Recorder) and MORE (Reuters)

Excerpt from Reuters: Local governments have issued subsidies to corn processors and feed makers, hoping to cushion farmers from reform shock.

But parliamentary delegates and analysts say it won't be enough to offset the drop in prices and absence of a minimum purchase price.

"The corn prices are lower than what the policies intended, so I suggest we appropriately increase corn subsidies ... to protect corn farmers' profits," Guo Naishuo, a delegate from Jilin to the National People's Congress, China's parliament, said on Wednesday.

Farmers in the northeast now make about 300 yuan ($43.36)less for each mu (0.06 hectare) of corn they grow than a year ago, said Xi Yinsheng, of the Research Centre for Rural Economy under China's Ministry of Agriculture, the China Times reported.

The region's woes illustrate the challenges for Beijing as it scrambles to cut a corn glut by inventing uses for the grain, such as biodegradable plastics, ensure food supplies for its growing urban population and secure livelihoods for millions of farmers.

One way is to promote the nation's polylactide sector, which turns corn starch and cassava into biodegradable plastic products such as bags and plates, as well as boosting production of ethanol.

Others measures include using corn to make a sweetener called xylitol, and degradable films used in greenhouses, Chen said.

But so far, these fledgling efforts have not led to a big jump in consumption of the crop, experts said.

Mei Zhangji, delegate from Heilongjiang, called on the government to boost the use of corn-based ethanol nationwide and lift restrictions on private companies entering the country's fledging biofuel market, which is dominated by state-owned enterprises.