Boerenbusiness analysis
Why there is a maize shortage in China
China is facing a maize shortage due to the fast-growing ethanol industry. Analysts therefore predict that maize imports will increase sixfold in 2020 to approximately 20 million tons. This would make China the largest importer on the world market.
The growing demand for imports in China is driven by the Chinese government's plan to introduce the fuel E2020 in 10. E10 is a mixture of 90% fossil fuel and 10% (bio)ethanol. Corn is often used to produce ethanol. It is expected that approximately 45 million tons of maize is needed annually to produce 15 million tons of ethanol. This could supply the largest car industry in the world with E10 fuel.
E10 fuel is commonplace in Europe. Filling stations in Germany, France and Belgium are obliged to offer petrol E10, which has been diluted with bioethanol. In France and Belgium, E10 is often the replacement for Euro 95. In Germany, E10 is often offered in addition to Euro 95, according to the ANBW.
Not self-sufficient
Meanwhile, China is in the process of ramping up maize production. Production is increasing especially in the northeast of the country, where the most important maize regions are located. On the other hand, there is growing demand from the ethanol industry, which is also located in the north. This leaves less maize to be able to supply the animal feed producers in southern China. It is reported that some 50 to 60 million are currently being transported south for the animal feed industry. Analysts predict that this volume will halve towards 2020.
According to Chinese statistics, maize consumption will grow by 8,4% this year to 221,97 million tons. The growth is strongly driven by the ethanol industry. It is expected that there will be serious shortages between supply and demand in the coming years. Additional imports are necessary to close this gap. In 2017, China will import up to 3 million tons of maize. With an average maize harvest, maize imports in 2020 would be close to 20 million tons.
Who is right?
Incidentally, the US Department of Agriculture (USDA) does not yet take into account the new fuel policy in China in its forecasts. For the 2019-2020 season, the USDA expects a slight import increase to 3,8 million tons of corn. This is in stark contrast to the 20 million tons expressed by those Chinese analysts.
If the Chinese analysts are right, China will be the largest importer of maize in 2020. In 2017, Europe is the largest maize importer with 16 million tons.
Wouter Job
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
