Guangzhou, Guangdong -- (SBWire) -- 06/17/2011 --Against the backdrop of corn price uptrend since the beginning of 2011, Chinese government is setting some policies and regulations to restrain the development of corn deep-processing industry, which is the second largest corn downstream industry in China. Through these regulations, the government tries to reduce the demand for corn in deep-processing industry and to guarantee the smooth running of national corn temporary reserve this year, as well as to stabilize corn price.

Actually, owing to inadequate supply this year, corn price has maintained an uptrend on the whole since the beginning of 2011. For instance, corn price in Changchun City reaches USD323/t on 16 May 2011, up about 11% over 11 Jan. 2011.

In order to stop the increase trend of corn price and to guarantee the smooth running of national corn temporary reserve, Chinese government published a policy on 19 April 2011, ruling that during 20 April 2011 to 30 June 2011, the value-added tax can't be offset if corn deep-processing manufacturers purchase corn from peasants. In so doing, the corn purchasing cost of deep-processing manufacturers will increase by 13% if they purchase corn from peasants. Through this regulation, Chinese government tries to make manufacturers reduce purchase volume of corn from peasants and to stabilize corn price.

However, this regulation has not much effect on stabilizing corn price as the price still rises after 20 April 2011, which can be explained by the following reasons. Firstly, this regulation can make manufacturers reduce the purchase volume from peasants, but they can turn to buy from traders and reserve companies in order to guarantee corn consumption. Along with more corn being purchased by traders, some traders may increase the price, probably pushing up corn price inversely. Secondly, this regulation can only sustain for a very short time-less than two months, so it's hard to have much effect during this short period.

But this regulation is not the only measure to restrain development of corn deep-processing industry. On one hand, Chinese government asks domestic financial institutes to suspend providing loan to corn deep-processing manufacturers and traders for purchasing corn from April 2011 to 30 June 2011. It may bring negative effects on corn purchasing of both kinds of companies, because many of them need the loan to purchase corn, especially those small ones.

On the other hand, it's reported that Chinese government may soon publish a regulation which rules that each deep-processing manufacturer's consumption volume of corn can't exceed its actual consumption volume in 2009; manufacturers exceeding the amount would be asked to suspend corn purchase. If this regulation is really executed, lots of corn deep-processing manufacturers' production will be negatively affected.

Overall, the three measures will increase the production cost of corn deep-processing manufacturers and restrain their development to some extent. Moreover, it's believed that more restraining policies will keep coming out this year. It is a big challenge for corn deep-processing manufacturers but also a great opportunity for competitive enterprises, because many inferior ones will be phased out and the market concentration will be improved this year.

Source: Corn Product China News June 2011

Content of Corn Products China News June 2011:

Chinese PLA industry to develop greatly
2011 VC output likely to be limited to 100,000 tonnes
Chinese corn products Imp. & Exp. analysis in March 2011
Chinese furfural export price to decrease in Q2
Domestic HFCS price to run high
China keeps restraining corn deep-processing industry
Some corn products still restrained by Guideline Catalogue for Industrial Restructuring 2011
Anhui BBCA renamed COFCO Biochemical
2010 top ten enterprises in fermentation industry published
Meihua Group to raise USD692 million for expansion
Starch sugar obviously replaces sugar in Q1 2011
Chinese corn price maintains uptrend in May 2011
New fermentation technology developed to produce mannitol

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.

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