SHANGHAI (Interfax-China) -- China's corn imports may become second only to soybean imports by 2010 on the back of rising domestic demand, said a corn industry expert at the 2007 China International Forum of Corn Bio-Refinery yesterday in Beijing.
"High demand from the deep processing and livestock feed industries may cause China to become a net corn importer in the long-run, but this will not happen immediately," said Ma Xiaohe, vice president of the Academy of Macroeconomic Research under the National Development and Reform Commission of China.
Ma added that China will work to ensure grain supply safety.
His view was shared by Li Xigui, an analyst with the China National Grain and Oil Information Center, China's official cereals information provider, who expects China's corn exports to gradually decline. However, it will still take time for the country to become a large-scale corn importer.
Li expects China's corn exports to reach 4 million tonnes and imports to reach 100,000 tonnes in the 2006/2007 year. He also expects China's corn exports to drop to 2.5 million tonnes in the 2007/2008 year and imports to rise to 400,000 tonnes.
China imported 70,000 tonnes of corn and exported 3.1 million tonnes in 2006, according to statistics from the General Administration of Customs.
China's corn consumption for industry use is expected to reach 34 million tonnes in the 2006/2007 year, up 23.6% from the 2005/2006 period. Industry corn consumption is expected to reach 36 million tonnes in 2007/2008, among which, consumption of corn-ethanol will reach 13 million tonnes and corn-starch, 23 million tonnes, according to the CNGOIC's forecast in March.
According to the forecast, China's livestock feed industry consumed 95 million tonnes of corn in the 2006/2007 year and is expected to consume 98 million tonnes in the industry in 2007/2008.
COFCO Ltd. is expected to increase fuel-ethanol production to 3.1 million tonnes by 2010, a company official said at the 2007 China International Forum of Corn Bio-Refinery yesterday in Beijing.
"COFCO Ltd. will focus on non-grain bio-mass production, including cassava, sweet potato and sweet sorghum in the future," general manager of COFCO's biochemical and bio-energy division, Yue Guojun, said.
The announcement was in response to China's latest policies on ethanol-fuel production, which are to develop non-grain alternatives so as not to threaten grain supply.
COFCO's ethanol-fuel production will consists of 42% corn, 26% cassava and 32% sweet potato and sweet sorghum by 2010. Company corn processing capacity is expected to reach 6 million tonnes by 2010.
The company intends to increase capacity through three state-appointed companies in which it holds stakes in.
COFCO signed an agreement with China Petroleum & Chemical Corp. (Sinopec), Asia's largest refiner, earlier in the month to develop bio-fuel. It also signed an agreement earlier this month with the State Forestry Administration to jointly develop forest bio-energy resources.
The company launched China's first cassava-based bio-fuel ethanol project in southwestern China's Guangxi Zhuang Autonomous Region last October, which is expected to reach an annual production capacity of 400,000 tonnes.
The re-branding of China National Cereals, Oils & Foodstuffs Corp. to COFCO Ltd. reflects the company's movement towards the bio-mass energy sector, according to COFCO Ltd.
China National Petroleum Corp.'s first bio-fuel project in the city of Nanchong in China's southwestern Sichuan Province will produce bio-diesel within the year, a company official told Interfax yesterday.
The project, operated by subsidiary Nanchong Refining and Chemical, which is affiliated with CNPC Southwest Oil and Gas Field Branch, will produce 10,000 tonnes of bio-diesel from its initial experimental facility. "But production is expected to grow ten fold to 100,000 tonnes annually by 2010," a company official with the Nanchong subsidiary, surnamed He, said.
The facility will source most of its raw material, physic nut, locally at first, but will turn to other regions of the province, such as Panzhihua, for supplies when production picks up, the official said.
CNPC Southwest Oil and Gas Field Branch has signed an agreement with the municipal government of Panzhihua to earmark RMB 2 billion ($259 million) in the plantation of 1.8 million mu (120,000 hectares) of physic nut in the city by 2015.
Another experimental project for producing ethanol fuel has also started in the Nanchong-based refinery, He added.
In the meantime, China National Cereals, Oil & Foodstuffs Corp. Ltd., the country's largest grain trader, is expecting its cassava-based ethanol fuel project, with 200,000 tonnes of capacity, to commence operation by the end of the year, the country's news portal for the food industry reported yesterday.
China is considering large-scale cassava-ethanol production in approximately three years time when production costs drop, an industry expert said yesterday in Beijing.
"The production cost for cassava-ethanol is currently RMB 6,000 ($777.17) to RMB 6,500 ($841.94). We aim to reduce this cost to between RMB 5,000 ($647.64) and RMB 5,500 ($712.41) in three years time. Although this will not be an easy task, there must be a price drop to make the industry commercially feasible," said Du Fengguang, general manager of Henan Tianguan Enterprise Group Co. Ltd., China's leading ethanol producing company.
China produced 700,000 tonnes of cassava-ethanol in 2006, consuming approximately 5.6 million tonnes of fresh cassava, according to Du.
The company has developed a cassava production base in the Southeast Asian country of Laos and is expected to yield 50,000 hectares of crop within three to five years.
"Cassava cannot be successfully grown in many parts of China due to unsuitable weather conditions, and currently, cultivation is on a small-scale. This has caused us to consider other countries," Du said. The company has also developed a production base for cassava and sweet potato in the Chinese city of Nanyang, Henan Province.
Cassava is mainly grown in Guangxi, Yunnan, Guangdong, Fujian and Hainan in China.
The company currently uses 60% wheat, 20% corn, 10% cassava and 10% sweet potato to produce fuel-ethanol and is also considering using rice as a raw material.
The company produced 470,000 tonnes of ethanol in 2006, accounting for 35.34% of China's total ethanol output, according to Du.
Ethanol-fuel is widely used in Henan, Anhui, Heilongjiang, Jili and Liaoning provinces, and to a lesser extent in Hebei, Hubei, Shandong and Jiangsu provinces.
Corn futures posted a sharp rebound on the Dalian Commodity Exchange (DCE) on Thursday to RMB 1,665, ($215) when counterparts at CBOT rose over 3% overnight to $3.80 per bushel amid fears that moistly weather in U.S. Mid-West could delay corn plantation.
Farmers' corn stockpiles are shrinking and market supplies are down. At the same time, some corn deep-processing mills have started to increase stockpiles.
However, with the week-long May Day holiday falling next week, investors should be cautious over potential sharp movements in corn futures prices at CBOT during the holiday, said analyst Cui Weijie from Huazheng Futures.
Ethanol is featured in several of today's articles and it is clear that production by various crops is experiencing phenomenal growth. Therefore the assumption here, using official statistics, appears to be vastly under-estimating the impact on domestic supply.
Consider that corn usage as an industrial feedstock grew 10-fold in the period between 2002 and 2005, with expectation of a further 23.6% this year.
Trends in China change extremely fast. You only need to look at the soybean industry to see how dramatic the shifts can occur. China first became a net soybean importer in 1995. It is now the world's largest importer of soybeans!
(c) Interfax-China 2007.
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