Along with the Auctioning of Temporarily-Stored Corn, Starch and Alcohol Processing Margins were Predicted to be Differentiated

Since May 28^th, temporarily-stored corn mainly produced in 2014 and 2015 has been auctioned officially in Heilongjiang, Jilin and Liaoning, with the auction volume of 4 million MT/week and with the bidding prices of RMB 1,600-1,750/MT. In consideration of the expenses for warehousing out and the freight, the costs of northeastern temporarily-stored corn arrival at the factories would be RMB 1,800-1,850/MT, less than the purchase prices of northeastern further processing companies. However, after the auctioning of temporarily-stored corn, the profits of alcohol further processing companies would improve, but starch processing margins possibly would go down.  
 
First, grain auctioned is mainly old grain produced in 2014 and 2018, which can’t be directly used by starch companies and be only used in small amounts; however, for industrial alcohol and fuel alcohol companies with no high requirements on quality of raw materials, they can use them normally, which can reduce production costs.  
  
Second, along with the auctioning of temporarily-stored corn, the predications on the whole market change, and corn further processed products such as starch face the pressure of decreasing. However, corn costs of starch processing companies are not directly benefited from auction, and the decline in product prices would directly cut down the profits of starch further processing companies; except raw materials, alcohol prices are linked to petroleum prices. A rebound in petroleum prices on the international market in recent period is good for stabilizing alcohol quotations.    
 
The auctioning of temporarily-stored corn brings adverse influence to starch companies, however, alcohol companies benefited. It was predicted that starch and alcohol processing margins would be differentiated.