In Q1 2016, the ex-works price of high fructose corn syrup (HFCS) stayed
sluggish in China. For instance, the average ex-works price of F55 HFCS was
USD401/t (RMB2,625/t) on 16 March, down by 4% over USD416/t (RMB2,710/t) in
Jan. This can be mainly attributed to:
- Decreased price of corn. According to CCM's price monitoring, the market
price of corn was USD286/t (RMB1,870/t) on 16 March, down by 6% over Jan. This
pulled down the production costs for HFCS and price also. Threat from low-price corn from North China: the purchase of corn for
temporary storage has been accelerated in Northeast China. By 15 March, the
storage of corn harvested in 2014/15 (2014/15: Oct. 2014-Sept. 2015, similarly
hereinafter) reached 97.16 million tonnes in the region, recording a historical
high.
This resulted in the decreased circulation of corn from Northeast China
in the market. As North China was not involved in the temporary storage
programme, its supply of corn was sufficient and low-priced. According to CCM's
research, the market price of corn from North China was about USD260/t
(RMB1,700/t) on 16 March, vs. USD291/t (RMB1,900/t) for corn from Northeast
China. The overall spot market was full of corn from North China
Notably, as the domestic spring ploughing of corn is coming, farmers are eager
to selling off the corn, thus strongly inclining to lowering prices for sales
promotion.
- Limited downstream demand. Before the Spring Festival, downstream enterprises
had already stocked up HFCS sufficiently. After the Spring Festival, as the
consumption was sluggish – demand for candy and beverages was restricted,
downstream enterprises were running down their stocks mainly.
Monthly ex-works prices of F42 HFCS and F55 HFCS in China, Jan. 2015-March 2016
Source: CCM
It is expected that the HFCS price will continue falling throughout 2016, mainly
because the price of corn will go down further.
- The target sales policy for temporarily-stored corn is to be issued. Targeted
at specific enterprises, the corn stored for a relatively long term and having
quality problem will be sold, given subsidy. It is supposed that the corn to be
sold this time is that harvested in 2011/12 and 2012/13 planting seasons,
probably targeted at alcohol producers (incl. ethanol producers) and subsidy
given after use at USD31/t (RMB200/t). In order to sell such corn successfully,
the pricing will be far below the market price, at about USD229/t (RMB1,500/t).
This will pull down the market price of spot corn.
- The * auction policy for temporarily-stored corn is to come out. In view of
the high storage (= 250 million tonnes) and in consideration of the failure in
2015 due to high auction price, the Chinese government, of great possibility,
will down-regulate this price.
* Auction policy: to be introduced after the purchase of corn (in 2014/15) for
temporary storage comes to a close on 30 April, 2016.
It is worth noting that as the HFCS price is going down constantly, the price
gap between HFCS and white sugar will be enlarged gradually, expected to push
up the HFCS consumption. On 16 March, the market price of white sugar was
around USD826/t (RMB5,400/t), up slightly over USD821/t (RMB5,340/t) in
Jan. Given that the price of white sugar will continue upturn, HFCS will be
advantaged further regarding price.
This article comes from Sweeteners China News 1603, CCM
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Tag: HFCS corn