After the United States, China is the world’s second largest producer and consumer of corn, according to a new report from USDA’s Economic Research Service. Most of the rapid growth in China’s corn use in recent years has been for industrial uses such as producing starch, sweeteners, ethyl alcohol, and other industrial products.

The Chinese government, according to the report, has encouraged development of industrial corn use over the past decade, and the country now uses almost all the corn it produces and exports manufactured products instead of corn.  

China is the world’s second-leading consumer and producer of corn, accounting for 19 percent of world consumption in market year 2007 – 2008. In past years, China was a leading exporter of corn, but its exports fell from a peak of 16 million metric tons (mmt) in calendar year 2003 to under 1 mmt in 2008. To date, the country is not a significant corn importer, but many market analysts expect this may change as a result of China’s rising consumption.

The rapid growth of industrial processing of corn makes it difficult to assess China’s corn market. About one-fourth of China’s corn now enters industrial processing, which yields hundreds of food, feed, alcohol, and chemical products.

Estimates of corn use from analysts in China indicate that the share of corn used in industrial processing may be higher than currently estimated by USDA and is already at or above the share in developed countries. Estimates are complicated by the large number of products and co-products and the lack of statistical information on these industries.

The new report describes the recent growth in industrial use of corn in China. It also reviews unpublished estimates of corn use from Chinese analysts, describes government support for industrial processing, and summarizes trends in corn product exports and prices.

At first glance, growth in both industrial use and feed use of corn would be expected to raise demand to a level that will soon turn China into a corn importer. More careful analysis, however, shows that China still had a substantial surplus of corn in the 2008/09 market year (October-September), despite the rise in industrial use.

The rapid rise in processing capacity was encouraged by government policies and outpaced the robust growth in domestic demand for corn-based chemicals, food, and feed additives. Faced with excess capacity, many producers sold their products on the international market, and helped trigger a worldwide boom in imports of industrial corn products. At the same time, China’s exports of unprocessed corn declined. Growth in industrial processing of corn slowed as the industry’s excess capacity became apparent.

Read the full report from USDA/ERS.