China’s Corn-Based Ethanol Fuel Threatens Food Security while Crowding the Market, State Commentary Warns

January 17, 2023

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by Silvia Ma (South China Morning Post) - China is facing a corn-supply shortfall that could put it at the mercy of imports, even as domestic output has seen sharp increases in the last couple of years; - Beijing has been increasingly pushing to reduce its reliance on external sources of crucial grains, including soybeans; - China’s domestic corn output has dropped in recent years, while import levels have been rapidly increasing since 2020.

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China must rein in the expansion of processing capacity for corn-based ethanol fuel to ensure that the nation has enough corn to meet its agricultural demands and to reduce its reliance on external sources, according to a recent commentary in state media.

The piece came as China’s top leadership has been repeating calls for food security as they look to feed the world’s most populous country.

More than 60 per cent of the corn China uses goes toward animal feed, and 20-30 per cent is allocated for industrial use, the commentary in the Economic Daily said on Thursday, adding that the rapid expansion of corn-based ethanol fuel capacity is crowding the market and pushing up corn prices by raising demand.

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China started producing corn-based ethanol fuel in 2000 as a means to utilise an excess supply of corn. Domestic corn output gradually declined from 2016-18 before starting to trend upward, with sharp increases in the last couple of years.

Since last year, China has been putting more controls on the processing of corn-based ethanol fuel, shifting from a policy of “moderately” developing grain-based fuel ethanol that was put forth in 2017.

China’s domestic corn output has dropped in recent years, while import levels have been rapidly increasing since 2020. Photo: Shutterstock

The piece came as China’s top leadership has been repeating calls for food security as they look to feed the world’s most populous country.

This has a direct impact on the nation’s food security, the piece warns, calling for more efforts to address the corn-supply shortfall.

“The processing of corn-based ethanol fuel must serve the overall situation of national food security,” the commentary said. “The country, with a large population but limited arable land, is always faced with maintaining a fine balance between food supply and demand.

“We cannot process grain-based ethanol fuel on a large scale like the United States does. Doing so would jeopardise the fundamentals of food security.”

Corn ethanol, produced from corn biomass, is the main source of ethanol fuel in the US. China started producing corn-based ethanol fuel in 2000 as a means to utilise an excess supply of corn. Domestic corn output gradually declined from 2016-18 before starting to trend upward, with sharp increases in the last couple of years.

“If the unrestricted production of corn-based ethanol fuel leads to a domestic supply shortage, China would be forced to import massive amounts of corn, which would fundamentally alter the domestic supply-demand dynamic and endanger the corn industry and food security,” the commentary contended.

China food security: bumper grain harvest defies year full of challenges, and it could affect global food prices (South China Morning Post)

China moves to ensure food security by reducing soybean meal in animal feed (South China Morning Post)

Excerpt from South China Morning Post: - Record grain yield comes despite delayed plantings, heatwaves and prolonged zero-Covid disruptions; - China appears to be reaping the rewards of policymakers making food security an urgent priority in the face of ‘unprecedented’ problems

China is prioritising food security to feed its people, and farmers were given a one-off subsidy this year to incentivise them to grow rice (pictured), corn and soybeans

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Grain output reached a record high of 686.53 million tonnes this year, up 0.5 per cent over 2021, the National Bureau of Statistics (NBS) said on Monday (December 12, 2022).

It also marked the eighth straight year that China – the world’s top crop producer and a major exporter – has maintained an annual grain output above 650 million tonnes, as Beijing has stepped up efforts to bolster food security against the backdrop of a looming global food crisis. READ MORE

Excerpt from South China Morning Post: Chinese farmers and local governments have been told to cut back on soybean meal in animal feed to reduce imports in the latest effort by Beijing to boost agricultural self reliance.

The Ministry of Agriculture and Rural Affairs convened a teleconference this week attended by local officials, agricultural companies and academics in which they said feed crops were the “contradiction” at the heart of China’s food security goals.

“Soybean meal reduction and substitution is not only a passive choice to deal with the uncertainty of external supply, but also an active action … it is of great significance for farmers to save costs, for feed producers to save materials and for industry-wide efficiency and national food security,” read a communique from the conference.

Soybean meal is one of the most commonly used protein supplements in animal feed and is produced from the residue left after oil extraction.

The by-product has become a major driver of China’s surging soybean imports over the past two decades, which has grown to meet rising domestic meat consumption in the world’s largest pork-consuming nation.

More than 85 per cent of China’s soybean supply was imported last year, with Brazil and the United States the two largest sources.

The cases of eight companies that reduced soybean meal in pig or poultry feed to between 3.3 and 8.4 per cent below the industry average were cited as examples in the meeting.

Beijing is supporting research on unconventional protein feed, expanding the production of microbial proteins, popularising low-protein animal diet technology and increasing the supply of high-quality foraging grass, the agricultural ministry said in another statement published on Monday. READ MORE