Summary: As the subsidy policy for corn deep-processing expired in Jilin Province on 1 July, 2016, all domestic subsidy
policies for corn deep-processing have been officially canceled in China.
Fortunately, corn deep-processing enterprises will not be impacted thanks to
the slumping corn price and their transformation to reduce purchase cost.
Actually, both price and supply of corn are positive for them now.
Since 1 July, 2016, the previous subsidy of
USD22.56/t (RMB150/t) for corn deep-processing has expired in Jilin Province,
according to the Notification of Subsidy Management for Corn Purchase by Corn
Deep-processing Enterprises in H1 2016 published by the Jilin Provincial Grain
Administration, subsidy for corn deep-processing, which used to be USD22.56/t
(RMB150/t), has expired since 1 July. In
fact, Heilongjiang Province and Inner Mongolia Autonomous Region had canceled
their subsidies in succession.
Subsidy policy for corn deep-processing was
first implemented in 2014, aiming at alleviating the tough operation of
deep-processing enterprises in Northeast China, improving enterprises'
initiatives in production, and increasing their operating rate. Additionally,
the subsidy policy aimed to improve transaction volumes at auctions of corn, so
as to relieve high pressure of enterprises that have large inventories in
Northeast China.
Subsidy amount for corn deep-processing in
Jilin Province, 2014-2016
Note: USD/RMB exchange rate:
USD1.00=RMB6.6496.
Source: Jilin Provincial Grain
Administration
CCM predicts that the cancelation of
subsidy policy would not have much impact on deep-processing enterprises,
given:
1. Domestic corn price had already
fallen back.
The subsidy policy was issued to reduce
cost for deep-processing enterprises as corn price stood high in 2014/15. So
far, the domestic market price of corn has remarkably fallen back, and the role
of the subsidy has become scarcely significant. According to CCM's price
monitoring, market price was USD291.35/t (RMB1,937/t) in H1 2016, down 24.28%
YoY.
2. The development and
transformation of deep-processing enterprises have reduced the impact from
subsidy on their production costs.
Through years' transformation and
development, corn purchase cost became less influential to enterprises. For
example, MSG producer Henan Lotus Flower Gourmet Powder Co., Ltd. was renamed
as Lotus Health Industry Holding Group Company and marched into health
industry; corn oil producer Xiwang Foodstuffs Co., Ltd. also developed into
health care industry by acquiring a health care enterprise. Others vigorously
developed downstream high added-value products. For instance, corn starch
producer Zhucheng Xingmao Corn Developing Co., Ltd. is active in developing and
promoting modified starch, maltodextrin and other products. MSG and amino acid
maker Fufeng Group Co., Ltd. highly promotes its xanthan gum.
Currently, the domestic corn market is
mainly occupied by policy-oriented corn. Auctions of corn for temporary storage
have launched since 14 July, 2016, and the volume of corn put on 21 July
auction was increased from 200 tonnes to 300 tonnes, which shows that
inventories are running out at higher speed. Besides, with newly-harvested corn
entering market and the gradually falling price, the purchase difficulty for
deep-processing enterprises in earlier period will be ameliorated. It means
that enterprises will be in advantage for corn purchase, no matter in supply or
price.
About CCM:
CCM is the leading market intelligence
provider for China’s agriculture, chemicals, food & ingredients and life
science markets. Founded in 2001, CCM offers a range of data and content solutions, from price
and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a
brand of Kcomber Inc.
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Tag: corn