China’s corn-based ethanol fuel threatens food security while crowding the market, state commentary warns

China is facing a corn-supply shortfall that could put it at the mercy of imports, even as domestic output has seen sharp increases in the last couple of years
Beijing has been increasingly pushing to reduce its reliance on external sources of crucial grains, including soybeans

China food security

Sylvia Ma

Published: 10:00pm, 16 Jan 2023

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China must rein in the expansion of processing capacity for corn-based ethanol fuel to ensure that the nation has enough corn to meet its agricultural demands and to reduce its reliance on external sources, according to a recent commentary in state media.

The piece came as China’s top leadership has been repeating calls for food security as they look to feed the world’s most populous country.

More than 60 per cent of the corn China uses goes toward animal feed, and 20-30 per cent is allocated for industrial use, the commentary in the Economic Daily said on Thursday, adding that the rapid expansion of corn-based ethanol fuel capacity is crowding the market and pushing up corn prices by raising demand.

This has a direct impact on the nation’s food security, the piece warns, calling for more efforts to address the corn-supply shortfall.

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“The processing of corn-based ethanol fuel must serve the overall situation of national food security,” the commentary said. “The country, with a large population but limited arable land, is always faced with maintaining a fine balance between food supply and demand.

“We cannot process grain-based ethanol fuel on a large scale like the United States does. Doing so would jeopardise the fundamentals of food security.”

Corn ethanol, produced from corn biomass, is the main source of ethanol fuel in the US. China started producing corn-based ethanol fuel in 2000 as a means to utilise an excess supply of corn. Domestic corn output gradually declined from 2016-18 before starting to trend upward, with sharp increases in the last couple of years.

Since last year, China has been putting more controls on the processing of corn-based ethanol fuel, shifting from a policy of “moderately” developing grain-based fuel ethanol that was put forth in 2017.

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“If the unrestricted production of corn-based ethanol fuel leads to a domestic supply shortage, China would be forced to import massive amounts of corn, which would fundamentally alter the domestic supply-demand dynamic and endanger the corn industry and food security,” the commentary contended.

When it comes to depending on external grain sources, Beijing has been on high alert, especially amid escalating geopolitical tensions with the US, and given the global market disturbances caused by Russia’s invasion of Ukraine.

China produced 277 million tonnes of corn in 2022, up 1.7 per cent from the previous year, according to official data. Meanwhile, its corn imports dropped by 26.9 per cent to 19.75 million tonnes in the first 11 months of the year. This came after corn imports reached record highs in consecutive years, from 2020-21.

Its corn yield reached 6.44 tonnes per hectare last year – a 2.3 per cent increase from 2021 – but still much lower than the US’ 10.88 tonnes per hectare, according to the latest figures from the US Department of Agriculture and China’s National Bureau of Statistics.

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The US is China’s biggest import source for corn and soybeans. In 2021, soybeans comprised the largest US agricultural export to China by value, at US$14.12 billion, with corn coming second at US$5.06 billion – more than four times the 2020 value, according to US agricultural figures.

Meanwhile, China has been ramping up its domestic soybean production – another important component in animal feed – and has said it will continue to do so. But increasing soybean plantations – in a bid to reduce China’s reliance on imports – has also squeezed out corn acreage.

China sowed 43.07 million hectares (106 million acres) of corn in 2022, down 0.6 per cent from the previous year. And it sowed 10.27 million hectares of soybeans, up 21.7 per cent from 2021.

Thursday’s commentary also said that, with China looking to reduce its reliance on fossil fuels while shifting toward clean and renewable energy sources, it should reduce its reliance on corn, rice and wheat in producing ethanol. Instead, it could derive more ethanol from sugarcane, cassava and corn stalks.

China intends to reach peak carbon emissions by 2030 and achieve carbon neutrality by 2060.

Lin Caiyi, vice-president of a research institute under the China Chief Economist Forum, had said last year that the supply-demand gap for corn in China reached 24.33 million tonnes in 2020, and that the gap for soybeans reached 94.93 million tonnes.

To address the issue last year, the Ministry of Agriculture and Rural Affairs started promoting soybean and corn belt composite planting technology in 16 provinces, to increase soybean production while stabilising that of corn.