China corn processors to become 'global players'

China's industrial corn processing industry faces a consolidation wave which will create "influential players" on international markets as it grapples with robust prices and waning government support.

Policymakers are encouraging mergers and shutdowns in a sector which has, nearly single-handedly, accounted for growth in China's corn use over the last decade, a Washington report said.

Beijing's stance represents something of a u-turn from its support, for much of the decade, for plants turning corn into products such as citric acid and monosodium glutamate and distiller's grains, viewing them as a way to mop up excess corn supplies and create employment in rural areas.

Exports of corn products jumped 140% in the three years to 2007-08, while those of the unprocessed grain sank by more than 90%.

However, high corn prices, which have remained 20-40% higher than those at US gulf ports, have sapped the government's appetite for further expansion as well as rendering many plants uneconomic.

International competitors

"The Chinese government encouraged the development of the corn-processing industry largely to reduce excess corn supplies and raise farm prices," the US Department of Agriculture said.

Major Chinese industrial corn product exports by value, 2008-09

1: Citric acid, $523m

2: Glutamic acid and salts, $293m

3: Glucose, dry and syrup, $168m

4: Dextrins, $133m

5: Lysine, $102m

Total: $1.73bn

Source: USDA 

"A trend of rising corn prices in China since 2005 suggests that these goals have been met."

Concerns about food security were likely to prompt closures of, particularly smaller or more polluting, plants many of which were mothballed for much of the year.

Capacity among alcohol producers reportedly fell to 36% in August from a peak of 69%.

However, the trend would also encourage the growth of "industry champions", with branded products.

"A handful of large companies are emerging as influential players in the domestic industry and in international markets," the report said.

Business profiles 

Companies came in a range of forms, with some state-owned, and some, such as Chengfu Food Group, in private hands.

Chengfu, which employs 1,300 people and has capacity for 400,000 tonnes of corn, is designated as a national agricultural leading enterprise, entitling it to state support.

Some companies related to Changchun Dacheng Industrial Group, which claims to be Asia's largest corn processor, are listed on the Hong Kong Stock Exchange.

Changchun Dacheng, which also claims to be the world's biggest producer of feed supplement lysine, has capacity to process 3.2m tonnes of corn a year.

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