A dramatic increase in the use of corn to produce ethanol would require increased output of the grain and could lead to higher prices.

That was the message from the Ministry of Agriculture yesterday, which warned that the rise in corn output would be necessitated by increased demand for industrial production and reduced global trade.

Despite a government limit on converting about 3 million tons of corn into ethanol - which is used as a gasoline mix - it is believed that up to 16 million tons was used last year, mostly by small, unlicensed producers.

Annual corn production was 144 million tons last year and is expected to hit 150 million tons by 2010, according to Chen Mengshan, director of the ministry's grain production division. The output rise will come about mainly by increased yield per hectare using improved strains, Chen said.

About 7 percent is consumed as food, 68 percent as fodder, and the remaining 25 percent used in industrial production, mainly of ethanol and starch.

Wang Ziming, former chairman of the Chinese Grain Commerce Association, estimates that the demand for industrial use of corn which was 45 percent for ethanol last year will surge by 30 percent annually till 2010, while fodder demand is set to rise by about 4 percent each year.

Zhao Jiuran, an expert on corn studies with the Beijing Academy of Agriculture and Forestry, told China Daily that unapproved corn-based ethanol production might account for a large proportion of total output.

The National Development and Reform Commission said last December that the actual production capacity of China's ethanol mills had reached 10 million tons, 10 times the capacity of the four officially approved corn-based ethanol producers in Jilin, Heilongjiang, Anhui and Henan provinces.

Chinese-language media have reported that the unlicensed production is sold to licensed producers or oil refineries.

The surging industrial demand caused corn prices to rise by up to 15 percent since the latter half of last year.

Source: China Daily