China's demand for U.S. DDGS unaffected by anti-dumping

Feb 24, 2012
by DTN

China’s decision to extend its anti-dumping probe against the U.S. has had little effect on the country’s purchasing of dried distillers grains with solubles (DDGS).

China launched an antidumping investigation against the U.S. in December 2010, claiming the U.S. dumping of DDGS into its livestock markets presented unfair competition for the country’s own ethanol producers who could not produce DDGS as cheaply because of high domestic corn prices.

Rumors that the Chinese government threatened to impose harsh duties on U.S. DDGS caused exports to China to plummet, as some Chinese buyers suspended their purchases in fear of high tariffs.

China’s DDGS imports fell to slightly more than 1.1 million metric tons (mmt) in the first 10 months of 2010. However, imports clocked in at 2.2 mmt in the first 10 months of 2011.

Almost exactly one year after launching the probe, in December of 2011, the Chinese government announced it would extend the probe until June 28 before making a final ruling. China’s Commerce Ministry called the case “special and complicated” and it warranted the extended months for the investigation.

The announcement of the extension has not affected China’s purchasing of U.S. DDGS.

“The extension itself has had no impact. Trade has continued, albeit at a slower pace than in 2010 and 2011,” said Rebecca Bratter, U.S. Grain Council vice president of internal operations.

And not only have the probe and extension not hurt trade, a recent study predicts China’s imports of U.S. DDGS will grow.

The council commissioned a study by the Chinese market analysis firm JCI which reported that a new five-year plan in China will restrict ethanol and DDGS production growth to 5 percent annually, according to an article in the council’s weekly Global Update.

If DDGS prices are attractive relative to corn and soybean meal, JCI predicted that China’s DDGS imports will not only grow steadily, but will reach as much as 6 mmt by 2016.

JCI also said it expects that the anti-dumping probe will not result in significant barriers to China’s purchasing of DDGS in the future.

Much of the credit for the continuation in trade with China has been the council’s continuing efforts to educate Chinese buyers about the benefits of U.S. DDGS. For instance, last fall, the council held workshops in China to promote DDGS to Chinese buyers. The workshops, which were highly attended, provided market information on DDGS, analysis of its value, information on quality control and pricing, as well as presentations on DDGS use in swine, poultry and dairy rations.

The council has taken no additional action because of the probe extension, but will continue its efforts to promote trade and maintain relations with China, Bratter said.

“We continue to promote the message that we believe in the value of trade and its mutual benefits for the U.S. and China,” she said. “We hope that at the end of the day, that is the message we will all agree on: that when trade works, the U.S. and China win.”

Bratter said the council believes the probe will be solved favorably for both the U.S. and China.

“We hope that this will be solved in a way that benefits both sides, so that trade can continue and Chinese industries can prosper.” —Cheryl Anderson, DTN