China will limit alcohol, biofuel and other non-animal-feed projects that use grain and edible oils as raw materials in an effort to secure grain supplies, China 's top economic planner said Tuesday.

Corn is used to make non-feed products ranging from ethanol to starch and sweeteners, which consume about one-third of China 's corn output. This consumption diverts supply from animal feed millers in the world's most populous country, raising the prospect of corn shortages, as consumption is expected to grow much faster than output.

The government will also limit corn starch projects with processing capacity of less than 300,000 metric tons a year, and eliminate those projects with annual capacity of less than 100,000 tons, the National Development & Reform Commission said in industrial guidelines published on its website Tuesday.

Beijing has failed to halt an unprecedented expansion of corn processing industries, whose combined annual capacity has risen to almost 70 million tons in the marketing year ending Sept.30, Shang Qiangmin, director of the state-backed China National Grain & Oil Information Center , told an industry forum last week.

These industries are expected to consume about 50 million tons of corn in the current marketing year, or about 29% of total corn output in the 2010 calendar year, the CNGOIC said.

Beijing recently ordered banks to stop lending to corn purchasers, and it has cancelled tax breaks for corn processors to limit their expansion.

The NDRC said China will also limit soybean-crushing projects outside of major producing areas, which include the northeastern provinces of Heilongjiang and Jilin and the Inner Mongolia Autonomous Region.

Soybean crushers' capacity utilization rates averaged about 50% last year, analysts said.

Total soybean crushing capacity is expected to exceed 100 million tons this year, Luan Richeng, president of Chinatex Corp., the nation's third-largest soybean crusher in terms of capacity, said last week.
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