Shengtai Pharma: Cornstarch Not Considered "Industrial Use" of Corn

This from Shengtai Pharmaceutical's (SGTI.OB) 10Q issued Thursday:

"Corn is the principal raw material for our cornstarch. Since mid-2007 food prices have been climbing at double-digit annual inflation rates in China, principally due to the shortages of pork and grain. Recently Chinese regulators reiterated publicly that they intended to control the development of industrial use of corn, such as the conversion of corn into ethanol. We believe that Chinese leaders are concerned that industrial demand for corn will raise corn prices and the government is determined to curb the use of corn for fuel.

At the same time, since December 11, 2007, Chinese regulators have been selling corn reserves to the open market on a weekly basis for approximately $240 per metric ton.

Management believes that stable corn prices will help maintain the availability of our raw materials, and therefore, stabilize our gross profit margin. We consider these government policies have had and will continue to have positive effects on our operations."

However, corn prices are still climbing, and how much will the state's reserves last? We haven't heard the end of this story yet.

My Position: None.

Comments

[huangthomas:]

Traditionally, Chinese use sorghum fermentation by red wine yeast, Monascus purpureus, to produce ethanol, not corn. Using corn for ethanol production is George Bush's attempt to enrich American farmers with agriculture subsidies. This stupid act will not be repeated anywhere in the world.

2008 Feb 16 12:52 PM