China tries to cure its corn hangover

30.01.2017

China's plan to get rid of its massive corn stockpile by using it as raw material for its fledgling biodegradeable plastics industry could be a game changer for Changchun Shengda Biomaterial and other private factories in China's corn belt.

After buying corn for years to support farmers, Beijing must find a way to work off a stockpile so big it could feed China's1,4 billion people for more than a year.

The government reckons the cure for its longstanding headache could be in promoting the nation's polylactide (PLA) sector, which turns corn starch and cassava into biodegradable plastic products like bags and plates.

China's state grain bureau announced the strategy in a five-year policy document at the end of December, which also included a push to increase ethanol output and use of the grain as livestock feed.

The council didn't give details of how it would implement the plan, which has the potential to boost corn prices at a time of a global glut.

Still, the policy marks a significant shift for the government and its food-security fixation, which has long made it reluctant to promote the non-food use of grains in a country

that endured three years of famine in 1958-61. It also illustrates how the corn mountain – and a market soaked in bumper US crops – is forcing policymakers into new territory.

If successful, a nationwide industry would help whittle down the corn inventory, built up after a decade of government buying from farmers to support incomes and ensure food for the growing, urban population.

Total global output of PLA products is expected to rise to 800 000 tonnes by 2020, from 200 000 tonnes in 2012, according to China Research & Intelligence in Shanghai. Half of that would be in Asia.

Some experts, however, have questioned whether focusing on polylactide is the answer to China's corn woes, saying it would take too long, with too much cash and still would not use up enough corn to make much of a dent in the stockpile.

JILIN'S NEW INDUSTRY

Jilin, the nation's second-largest corn growing province, is providing a blueprint for how the policy could take shape.

In a bid to revive its slowing economy, the province has been attempting to build and finance a new industry, investing public money to coax eight companies to make products from PLA such as plastic bags and plates.

TOO LONG, TOO LITTLE

It takes about three tonnes of corn to make one tonne PLA. Based on China's current PLA capacity, that means it would take almost 400 years to work off the corn stockpile.

“Making plastics out of corn is like quenching the fire of a cartload of firewood with one cup of water,” said Feng Lichen, president of Yumi.com, corn industry website based in Dalian, Liaoning province.

After abandoning its corn security policy in 2016, the government sold off some of its old inventory but still has more than 200 million tonnes in warehouses, according to some estimates. Much of it is poor quality is not fit for human consumption.

Removing that overhang from a bloated global market could create additional demand for corn outside China and boost prices.

That, however, assumes in part that China makes a success out of its new biodegreable plastics industry.

At 40-50 cents a bag, twice the price of regular plastic bags, it's a challenge to get supermarkets to use biodegradable ones.

Public awareness of the environmental damage from making regular plastic bags is limited outside of major cities.

Jilin, which banned production and use of plastic bags in 2014, has pioneered what could become a model for other regions to follow, experts said.

Other local governments in the corn belt, from Jiangsu to Hainan, are considering following suit, industry insiders say.

The domestic market for biodegradable plastic could eventually be as big as 2-3 million tonnes per year if Beijing banned the use of normal plastic, said Cofco's Qian.


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