The Chinese government hopes to reduce supply by providing tax incentives and subsidies to processors
BEIJING, China (Reuters) — China’s northeastern Heilongjiang province, the nation’s top corn producer, plans to encourage investors to build large scale local processing plants in the latest move to whittle down a huge corn glut, local media reported.
The provincial government issued guidelines seeking to encourage the use of corn for fuel ethanol, as well as for industrial uses, such as modified starch, high quality alcohol for medical and cosmetic use and for use in bio-degradable materials, the reports said.
The guidelines called for plants producing fuel ethanol to process at least 300,000 tonnes of corn a year, while processing plants for industrial uses would have an annual capacity of 600,000 tonnes or more, local media said.
“It is a favourable policy for both corn and corn processing. It will help guide the corn processing industry in Heilongjiang to develop reasonably and boost the industrial consumption there,” said Zhang Dalong, an analyst with COFCO Futures.
China has unveiled a series of measures to whittle down a corn stockpile estimated at more than 200 million tonnes, which is equivalent to about a year’s demand and the legacy of a now abandoned price support scheme.
Beijing said earlier this month that it planned to roll out the use of ethanol in gasoline nationally by 2020.
Heilongjiang has about 10 million tonnes of corn processing capacity and is expected to add more than 13 million tonnes of annual capacity in the next three years, according to COFCO Futures, citing industry statistics.
The government is targeting production outside of regular corn starch and lysine, which are already in oversupply, local media reported.
The media reports did not give details of preferential policies for investors, but analysts said subsidies and favourable tax policies were likely to follow.
“Release of the document indicates that subsidies to corn processors in the northeast will likely to continue this year,” said Zhang.
Top corn provinces in the northeastern corn belt last year offered subsidies to corn processors and feed producers in the region to boost demand for the grain.