(Yicai Global) Feb. 24 -- China has changed tack on ethanol produced from corn biomass, saying it will now “strictly control” the industry because of the short supply of maize, according to the government's annual key policy statement.

China will “strictly control the corn-based fuel ethanol processing industry,” according to the No. 1 central document issued yesterday, replacing its stance of “moderate development of grain ethanol fuel” set out in 2017, when corn stocks were high.

The No. 1 central document, released by China's central authorities at the start of every year, is a key indicator of policy priorities for the year ahead.

China's development of the corn processing industry adhere to the principle of “not competing with others for grain and not competing with grain for land,” Cai Hailong, a professor at the School of Economics and Management of China Agricultural University, told Yicai Global.

If the industry developed too much, it would squeeze the supply of corn feed and affect the supply of products such as meat, eggs, and milk, he said. More than 60 percent of maize in China is used for feed and about 30 percent is used in industrial processing, Cai added.

Corn production has fallen for four straight years since 2016, the year when new processing projects started to use new maize after old stocks were consumed, said Lin Guofa, research director at bulk farm produce e-commerce and fourth-party logistics platform 16988.Com, noting that the demand for corn from the feed industry continues to grow.

These factors have resulted in tight supply and rising prices of corn since 2020, Lin said. Corn prices sometimes outstrip the cost of wheat, he added.

China’s corn production rose 4.6 percent to 273 million tons last year due to a sharp increase in the area planted with the cereal.

Editors: Tang Shihua, Futura Costaglione