Livestock farmers get corn supply help
Source: Bloomberg News |
April 19, 2011, Tuesday
|
Print Edition
Print Edition
CHINA is taking steps to limit consumption in the biochemical and sweetener industry to ensure supply for livestock farmers, said three people who received a government document on the matter.
Processors will be barred from buying more corn than their consumption level in 2009 and the government will increase value-added taxes on corn-based products, said the people, who declined to be identified as the information isn't public.
China's demand for corn-derived products, ranging from pharmaceutical supplies to alcohol and sweetener in beverages, is outpacing growth in livestock consumption. The introduction of tightening measures showed the country's demand for corn has exceeded production, underlying growing needs for imports, according to Wanda Futures Co.
"While the government may succeed in limiting further purchases by the industrial processors, the policies may be just forcing companies to consume inventories, but won't make demand disappear," said Wang Chen, Beijing-based director of research at the country's second-biggest agricultural futures brokerage.
Financial institutions were ordered to stop providing companies with loans to purchase corn until the end of June, according to the April 8 document cited by the people.
The government will increase surveillance of large companies to ensure their operations conform with directives and local authorities were ordered to root out processors with small or inefficient operations, they said. The government will stop accepting new license applications for buying grain, they said.
Large industrial processors anticipated the tightening moves and stocked more supplies, Wang said.
As of April 5, companies and traders bought 74 million tons of corn in major producing regions, more than twice the amount at the same time last year, according to data by the State Administration of Grain.
Processors will be barred from buying more corn than their consumption level in 2009 and the government will increase value-added taxes on corn-based products, said the people, who declined to be identified as the information isn't public.
China's demand for corn-derived products, ranging from pharmaceutical supplies to alcohol and sweetener in beverages, is outpacing growth in livestock consumption. The introduction of tightening measures showed the country's demand for corn has exceeded production, underlying growing needs for imports, according to Wanda Futures Co.
"While the government may succeed in limiting further purchases by the industrial processors, the policies may be just forcing companies to consume inventories, but won't make demand disappear," said Wang Chen, Beijing-based director of research at the country's second-biggest agricultural futures brokerage.
Financial institutions were ordered to stop providing companies with loans to purchase corn until the end of June, according to the April 8 document cited by the people.
The government will increase surveillance of large companies to ensure their operations conform with directives and local authorities were ordered to root out processors with small or inefficient operations, they said. The government will stop accepting new license applications for buying grain, they said.
Large industrial processors anticipated the tightening moves and stocked more supplies, Wang said.
As of April 5, companies and traders bought 74 million tons of corn in major producing regions, more than twice the amount at the same time last year, according to data by the State Administration of Grain.
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