Serious overcapacity corn starch industry is in trouble

After the rapid expansion in the past few years, the current corn starch enterprises have serious overcapacity, the corn starch market has entered a downward cycle, and enterprises are struggling on the edge of losses. Overall, most small enterprises lack confidence in continuing to work in the corn starch industry, and with the rising environmental protection requirements and financial constraints in Hebei, these small enterprises that have been shut down are less likely to resume production.

In contrast, large-scale corn starch processing enterprises show strong resistance, mainly because, on the one hand, large enterprises generally provide their own power plants to provide electricity and steam, which helps enterprises to reduce production costs; on the other hand, large enterprises also have downstream deep processing capacity, which supports the production of upstream corn starch. At present, due to the depressed downstream demand, many large corn starch enterprises have a backlog of inventory, some enterprises said that a loss of 100 yuan per ton is tolerable, as far as possible to maintain the continuity of production.

The reason why the corn starch industry is in operational difficulties, in addition to environmental protection pressure to increase costs, summed up there are three reasons.

First of all, the price of corn raw materials is high. Continuous years of collection and storage, the current national corn inventory is too high, only 2014-2015 corn temporary storage procurement of more than 82 million tons, coupled with the temporary storage and state reserve carry-over inventory in the past few years, the national corn inventory in the hands of more than 150 million tons, basically meet the domestic corn demand for a year, the huge corn inventory increased agricultural financial support but also affected the market corn circulation. After the second quarter of 2014, as corn was mainly concentrated in the hands of the state, grain in circulation in the market was tight, and corn prices soared rapidly. Corn prices in Shandong Province soared to 2800-2850 yuan / ton in mid-August, up 500 yuan / ton from the end of March. The starch deep processing industry is under the pressure of huge production cost due to the high price of corn.

Second, the financial pressure has increased significantly. Domestic starch production enterprises are mainly private enterprises, the financing cost is on the high side, and the annual financing cost is more than 8%. The product raw material corn has obvious seasonality. In the past two years, the domestic corn price fluctuates greatly and the capital pressure, so it is very difficult for enterprises to build a large amount of inventory when the corn price is on the low side, and when the corn price rises, they have to bear the huge cost pressure. there are even serious processing losses. Before the first quarter of 2014, domestic corn prices continued to decline, but enterprises were unable to build a large amount of inventory due to financial pressure. Domestic corn prices soared sharply in the second and third quarters, and enterprises suffered huge losses. At one point, the processing loss of tons of corn reached 150-200 yuan, lasting nearly one quarter.

Third, downstream demand is not strong. The downstream products of starch are mainly sugars, including fructose syrup, maltose, glucose (solid and liquid) and dextrin. The Bureau of Statistics announced that the total amount of solid and liquid sugar in 2012 was 11.46 million tons, consuming about half of starch.

According to Lin Guofa, a senior researcher, there is already overcapacity of starch downstream products-sugars. At the end of 2014, the national production capacity of fructose syrup was close to 6 million tons. In 2014, the output was only 300-3.2 million tons, and the capacity utilization rate was only 50-55%. Glucose and maltose also have a certain degree of overcapacity, and dextrin production is roughly the same as demand, which can maintain a high operating rate. Alcohols due to capacity expansion in recent years, the gradual emergence of overcapacity, due to high domestic corn prices led to high prices, exports fell. Lysine in amino acid has appeared serious overcapacity, the price of corn is on the high side, the domestic production cost of lysine is high, while the foreign production capacity is on the high side, which makes the export of amino acid more difficult. The continuous downturn of the paper industry in the chemical industry in recent years is not conducive to the demand for starch, while the slowing down of the demand for meat and expanded food in the food processing industry is not conducive to the demand of the starch industry.

In view of the plight of the corn deep processing industry, the industry believes that direct subsidy of the target price can be considered, and policy considerations should balance the interests of farmers and deep processing enterprises, and at the same time solve the difficulties of financing and loans. In addition, enterprises are encouraged to use futures and other financial instruments to avoid the risk of price fluctuations of raw materials and products, use commodity futures to establish virtual inventory, hedge price downside risks, and so on.