Chinese enterprises investing strongly in corn deep processing 04-16-2018

China's enterprises are investing in the corn deep processing market, backed up by subsidies of the government. Corn deep processing is an effective way to reduce the large corn stockpile that mostly contains low quality corn. 



 


The supply-demand situation for corn in China is still imbalanced in 2018, with a surplus of supply. Furthermore, the market is even facing a continuing decreasing planting area. While the country is still sitting on a huge corn stockpile, domestic companies are investing in different downstream industries, such as corn deep processing. 


According to CCM’s research, China is offering export subsidies for deeply processing products. Especially in the northern part of China, subsidies for deep-processing enterprises are being implemented. 


To be more precise, Chinese governmental officials revealed subsidies for feed and corn deep processing enterprises in the country. Corn deep processing enterprises, including corn starch and alcohol producers, that exceed a certain processing capacity, as well as feed enterprises with a high annual output that purchased corn and processed it before June 30, 2018, will get a special subsidy per tonne of purchased and processed corn. 


Jilin Province, one of China’s major corn producing areas, took the lead to disclose a subsidy for feed companies. Compared with last year, both Heilongjiang and Jilin shortened the required corn purchasing period and decreased the subsidies. 


Meihua Holding new project

Meihua Bio is construction a new site capable of 3 million t/a corn processing. Currently, the first stage of the project has started construction and will be put into operation in October 2018. The project investment agreement was signed by Meihua Bio with the People's Government of Baicheng, and the Management Committee of Baicheng Industrial Park on August 10, 2018. 


According to CCM, the company is investing a total amount of USD1.59 billion. In the first stage, cornstarch sugar equipment, lysine equipment and compound fertiliser equipment will go into operation. For the second stage, additionally, corn starch sugar equipment, monosodium glutamate equipment and more compound fertilizer equipment is being built. The third stage will include corn starch sugar equipment and functional sugar equipment. 


China’s corn deep processing industry

After 10 years of restrictions, China’s government is opening the access of foreign investments into the corn deep processing industry again. The government is aiming to enhance the economy with this step and also hopes to improve the effective way to reduce the huge corn storage. 

 

China’s corn deep processing industry actually has the longest processing chain in all food crops processing. After all, up to 2,000 downstream products can be created from processing corn. The corn deep processing industry has segments in the food business, medical, daily supplies, fuel, and more.  


According to CCM, the Catalogue for the Guidance of Foreign-Invested Industries was amended in 2017 and finally will into effect on July 28. The amended version has cancelled all restrictions of foreign investments into the corn deep processing and fuel ethanol industry, which means domestic and foreign investors can equally invest in the industry and mergers and acquisitions between enterprises are easier. 


The restriction for foreign investment was established in 2007 as a response to the limited corn supply which was needed for the food and feed industry rather than used in the corn deep processing industry. The result of the restriction was that less than 26% of corn was able to be used in deep processing. Despite the restriction of foreign investments, also new projects for deep processing were supervised more closely and needed approval.  


The biggest change will occur in the domestic competition, as foreign enterprises are generally enjoying better-funded companies, stronger research and development abilities as well as higher talent in human resources. As a result, the industry in China will likely concentrate more and the technology will be improved faster.  


The corn supply for China’s corn deep processing industry was tight in the last years. In order to feed the increasing population in China and guarantee corn supply for food and feed, some corn deep processing products were restricted by the government. Inefficient corn starch production lines even have been required to be eliminated. For example, the 2011 edition of the Guideline Catalogue for Industrial Restructuring stipulated that the construction of corn starch production lines with capacity under 300,000t/a shall be restricted.     


About the article

The information for this article comes from CCM, China’s leading market intelligence provider for the fields of agriculture, chemicals, food and feed. 


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