Chinese DDG imports to halve, as boom time ends

18.11.2016

Chinese imports of dried distiller's grains will fall by 50% in 2016, thanks to increased domestic supply, falling corn prices, and restrictions on US exports, said the analysis group CCM.

As the Chinese government pulls price support for corn, the incentive to import large volumes of unregulated dried distillers grains has ebbed away, bringing a three year boom in imports to an end.

Dried distiller's grains (DDGs) are the high protein residue of grain ethanol production, which are valued as an animal feed.

Falling imports

According to Chinese customs data, DDG imports were 71% year on year in September, at 272,200 tonnes.

And this pattern will continue for the rest of the year, CCM said.

The US is the main producer of DDGs, thanks to its huge corn ethanol industry. China is largest importer of these supplies, for use in its domestic livestock sector.

Boom times are over

The decline in imports brings to end a long boom in Chinese demand, which saw DDG imports soar between 2012 and 2015.

Demand for DDGs was fuelled by the high corn price in China, thanks to government support.

With corn imports limited, feed mills turned to substitutes such as sorghum, barley, and DDGs.

Market slump

But as the government pulls back its support for the corn market, prices have slumped some 20%, removing the incentive to import alternative feeds.

"After the rapid fall of corn price in China, the import volumes of its other substitutes fell as well," CCM said.

"The decrease of DDG import volume in China is mainly attributed to two reasons," said Liang Jiawei, editor of CCM's Corn Product China News.

"One is the falling price of corn in China and the other is anti-dumping on imported DDGs from the USA," said Mr Liang.

Rising domestic production

And additional pressure on DDG demand comes from a trade spat between China and the US.

In September, the Chinese government announced anti-dumping duties on US DDG imports.

"Due to the cost increase for imported DDGs, many feed enterprises preferred DDGs produced in China… which led to the fall of import volume," CCM said.

In addition, Chinese domestic ethanol production is rising, increasing the availability of DDGs, helped by government support for domestic corn buyers.

With more processing on corn, the supply of DDGs is expected to increase in China," said Mr Liang.


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