China's levies on DDGs 'sign of growing rift with US'


China's hike to import taxes on US distillers' grains is evidence of a growing rift with the US on ag trading, the US Grains Council said, warning that that "we are less than welcome in their market".

The council - a non-profit export promotion body whose members include top's agribusinesses such as Archers Daniels Midland, Bunge and Case - said that Beijing's decision to lift import taxes on US distillers' grains, or DDGs, was part of a "series of events that is a severe departure" from previous relations.

Chinese importers of DDGs will, for five years starting on Thursday, pay an anti-dumping duty of 42.2-53.7%, plus an 11.2-12% anti-subsidy tax - up from rates of 33.8% and 10-10.7% respectively imposed in September, amid claims by Beijing of dumping by the US.

However, the complaints are "not supported by the evidence and raise serious questions regarding… compliance with China's international obligations," the council's chief executive, Tom Sleight said, adding that the duty was part of a trend of growing detachment in relations.

'Less than welcome in China'

Beijing's move "is the latest in a rash of measures taken by the Chinese government to restrict access to that market for US feed grains", Mr Sleight said.

"It came just 10 days after action by the Chinese government to dramatically increase tariffs on imported US ethanol from 5% to 3%, effectively stopping a growth market for US farmers and ethanol producers."

Furthermore, US farmers "continue to wait for China's approvals of biotech corn events, which last happened in 2014", and without which US exports to China risk breaching GM curbs.

Mr Sleight added that the "implication" of these moves was "clearly" that the council was "less than welcome in their market, and this will challenge the extent of our engagement with China" after 35 years.

'Just a shooting star'

The warning comes amid a growing focus on US-Chinese relations after Donald Trump, who will be inaugurated as US president on January 20, in the run up to his election condemned China as a currency manipulator, and threatened US import tariffs of up to 45% on Chinese goods.

Mr Trump has also offended Beijing by breaking with traditional US policy on Taiwan, and appointed China "hawks" including Peter Navarro, Robert Lighthizer and Wilbur Ross to his administration.

Chinese state media have, in return, issues a series of cautions to Mr Trump, warning him for instance "not try to boss China around" on economic and security issues.

An editorial in the Global Times newspaper, which is affiliated to China's ruling Communist party, said: "May the arrogant Americans realise that the United States of America is perhaps just a shooting star in the ample sky of history."

'Biggest negative'

The US Grains Council added in its comments on the import duties that "protectionist trade restrictions based on false allegations do not benefit" either the US, for which the latest tax moves would prove "painful and damaging" for the DDGs industry, or China.

Indeed, the levies' "biggest negative impact will ultimately be on China's feed and livestock industries, which risk losing access to an important and cost-effective feed ingredient, and on millions of Chinese households that will likely face greater food price inflation".

DDGs, manufactured as a byproduct of grain ethanol output, are used as a high protein ingredient in livestock feed, often as an alternative to soymeal, or to corn.

China is attempting, through measures such as subsidising consumption and ditching a guaranteed pricing scheme for farmers, to erode its huge state stockpiles of corn.

'Most likely culprit'

However, China, a major importer of many agricultural commodities, including palm oil, pork, soybeans and sugar, relies on US supplies to meet much of this demand.

Earlier this week, the country was seen as the buyer of 120,000 tonnes of US spring wheat, which the US Department of Agriculture said had been sold to an "unknown" importer.

"The sale got the attention of traders, and sent most scrambling to determine who was buying panamaxes of spring wheat," said Tregg Cronin at US broker Halo Commodity Company.

"The most likely culprit would be China as traders whispered with some thinking another 2-4 panamaxes may have been conducted and could therefore be announced yet this week."

US trade data this week also showed that China brought 19m gallons of 121.9m gallons of US ethanol exported in November.


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