China may not enact ethanol fuels mandate amid corn supply concerns

Source: By Reuters • Posted: Tuesday, September 17, 2019

Now in doubt as both stocks and output decline

SHANGHAI: China‘s plan to implement a nationwide mandate for ethanol-blended gasoline in 2020 is in doubt after a significant decline in the country’s corn stocks, a government researcher said on Tuesday.

State stockpiles of corn, the main raw material for ethanol production, have fallen to around 56 million tonnes currently from more than 200 million tonnes in temporary reserves in 2017, said Wu Tianlong, a deputy researcher with the Rural Economy Research Center under China’s Ministry of Agriculture and Rural Affairs.

Beijing’s plan for all of the country’s gasoline to be made with a 10% blend of ethanol would require about 15 million tonnes of the biofuel annually, or some 45 million tonnes of corn, about 16% of the country’s current consumption.

With much smaller stocks available for production of the biofuel, implementation of the 2020 policy would risk pushing up corn prices, Wu told an industry event. The government has been selling off the grain in regular auctions after abandoning a stockpiling programme aimed at supporting farmers that was in place for years.

“It remains uncertain whether the ethanol policy will continue to be implemented, as the policy context has changed significantly from 2017 when the plan was made,” he said.

Wu said China is already in a supply deficit, with a shortfall of around 20 million tonnes expected this year, pushing prices slightly higher over 2018’s level.

Worries about supplies in the world’s No.2 producer of the grain come even as a huge contraction in the pig herd curbs demand for corn in feed, added Wu.

Corn demand for pig feed is set to fall by 20 million tonnes this year, after an outbreak of deadly African swine fever, although use of the grain in feed for other animals will rise 10 million tonnes, Wu estimated.

Meanwhile, the fall armyworm, a devastating pest that reached the country for the first time this year, has had limited impact on output, he said.

China will harvest this year’s corn crop in coming weeks, with the ministry recently estimating output of 255.5 million tonnes, down slightly from 257 million tonnes last year.