(Reuters) – China’s plans to cut state corn prices from November will help loss-making companies processing the grain, bringing some shuttered capacity back online in the world’s No.2 consumer of the commodity, industry officials said.
Firms including Asia’s largest corn processor, Global Bio-chem Technology Group Co Ltd, have been hit hard by the highest prices in the world over the last few years, along with weak demand as China’s economic growth slows.
Beijing plans to cut the state support price for corn by about 10 percent in the 2015/16 stockpile scheme starting in November. That will mark the first such decrease since 2008 in a system designed to help farmers and struggling rural communities.
“The cut will lower costs for the industry and help the restart of some production capacity that has been suspended for some time,” said Sun Guojing, general manager at corn processor Jilin New Tianlong Industry Co Ltd.
The amount of corn processing capacity online in the country could grow by 10 percentage points next year in the wake of the move from around 40 percent now, with corn sweetener expected to take more domestic market share from sugar, said Wang Baoquan, an analyst with an industry portal.
The cut could offer some relief to Global Bio-chem, which a senior company official said was aiming to restart production when it had completed restructuring. He declined to be identified or give further details as he was not authorised to speak with media.
State-backed newspaper, the China Business Journal, reported over the weekend that the firm shuttered production in March. Another newspaper, the National Business Daily, reported earlier this month that Global Bio-chem owed 9.8 billion yuan ($1.9 billion) to banks and 2.1 billion yuan to suppliers and business partners, as well as 80 million yuan to corn farmers.
The company said in an Aug. 30 exchange filing that it had raised $112.7 million after selling shares to the Modern Agricultural Investment Fund, a Jilin province-backed fund.
