China clamps down on corn use in biofuels

By Dominique Patton

- Last updated on GMT

Related tags: Agriculture, Maize

China will restrict the use of corn for producing biofuel in a bid
to keep corn prices down and protect its growing food industry.

The country's standardization administration this week published an urgent notification to industry, warning that only four companies approved by the government could produce corn-based fuel. An official paper was also issued by the National Development and Reform Commission (NDRC), designed to cool down the "overheated"​ ethanol processing sector. The moves come as corn prices continue to climb, despite a good harvest. China is the world's second largest corn producer after the US but rising demand for meat is putting pressure on stocks as more corn is fed to pigs and poultry. Coupled with the rising interest in biofuel, corn prices are on an upward trend. Currently 50 metric tonnes of corn costs CNY59.28, up by 6.8 per cent compared with last year. "We have a principle with regard to biofuel: it should neither impact the people's grain consumption, nor should it compete with grain crops for cultivated land, "​ the state-run newspaper People's Daily quoted Yang Jian, director of the development planning department under the Agriculture Ministry, as saying. In the past few years, China's corn production has increased from 107 million metric tonnes in 2000 to 140 million metric tonnes in 2005, together with a rising proportion by 5.9 per cent in total crop production. But data show that the expansion of corn biofuel capacity is much faster than the growth of corn production. In 2001, 12.5 million metric tonnes of corn were processed as biofuel, increasing by 84 per cent to 23 million metric tonnes in 2005, according to data gathered by the China Business. The output of corn only grew by 21.9 per cent during this period. And China's acreage for growing corn is not expected to increase much, with 25.7 per cent of arable land set aside for corn by 2010, from 25.1 per cent in 2005, according to Wang Xiao Hui, a senior analyst with the National Grain & Oil Information Center. Wang Xieqin, a researcher at the Chinese Academy of Engineering told "China used to use aging crops as material when starting to produce ethanol but corn is beginning to replace them. "​ Production of ethanol, one of the main biofuels, is targetted to increase under the country's latest five-year economic plan, with China seeking to reduce its dependance on fossil fuels. "Currently, total annual production of ethanol from the four state-designated factories is 1.02 million tonnes. According to schedule, by 2020 China should be able to produce 15 million metric tonnes of ethanol every year, which will create difficulty in finding enough materials, "​ said Wang. At present, there are five provinces, Heilongjiang, Jilin, Liaoning, Henan and Anhui and some areas in Jiangsu, Hubei, Hebei and Sandong that are using ethanol instead of lead free gasoline as power for vehicle, he added. This means China follows the US and Brazil as one of the biggest users of ethanol. "The source of biofuel has to be diversified. The development of biofuel shouldn't be at the expense of expansion of farmland, since food is still the priority of China. We should put more attention on sweet potato and cassava that are rich in starch and suitable for planting in China based on its terrain. "​ The government is seeking to support production of ethanol using non-food crops like cassava, sweet sorghum, and other plants with high fibre content. Worldwide, the rising demand for grains for fuel processors has pushed up food prices, but food security is a bigger issue in China than most other nations. Wheat prices are also high despite a record crop in China, as severe droughts in the US and Australia impact global markets, and prices for edible oils, meat and other products have also jumped in recent months.

Related topics: Policy, Industry growth, China, East Asia

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