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Cash Market Moves
Monday, May 21, 2018 2:24PM CDT
By Mary Kennedy
DTN Cash Grains Analyst

Alvaro Cordero, manager of global trade for the U.S. Grains Council (USGC), told attendees at the 22nd Annual Distillers Symposium on May 16 that one of the biggest challenges facing distillers dried grain with solubles (DDGS) has been China. Go back to January 2017 when China's Ministry of Commerce (in a final ruling following a year-long trade probe) slapped harsh anti-dumping duties and tariffs on U.S. DDGS imports. Anti-dumping duties were set at a range from 42.2% to 53.7%, while anti-subsidy tariffs will be between 11.2% and 12%.

Preliminary penalties assessed in late September 2016 of an anti-dumping penalty of 33.8% and an anti-subsidy tariff of 10% to 10.7% had already shut off most DDGS exports to China. However, the final ruling of an increase to those penalties pretty much signaled an end to DDGS heading to China. Those penalties, applied to both U.S. distillers dried grains with or without solubles, caused U.S. exports to China to fall from 5.4 million metric tons (mmt) in 2015 to 3.3 mmt in 2016.

On November 9, 2017, China’s Ministry of Foreign Affairs announced it would allow U.S. DDGS to be imported without charging an 11% value-added tax (VAT). However, the fact that penalties imposed earlier in the year remained in force, dampened any prospect of increased exports to China. At the time the VAT was removed, DDGS exports to China totaled a mere 739,000 metric tons (mt) for 2017.

The U.S. Census Bureau said on May 3, 2018, that U.S. exports of DDGS totaled 905,558 mt in March, down 12% from a year ago. Mexico was the top export destination again in March, accounting for 17% of the total, followed by Vietnam, South Korea, Thailand and Indonesia. The first three months of the year, DDGS exports were down 13% in 2018 from a year ago. As you can see, China's absence is obvious.

Cordero said there is still uncertainty facing U.S. DDGS exports. "In 2018, the U.S. faces additional challenges both on tariff and non-tariff barriers," said Cordero. Another challenge he noted are restrictive government policies abroad such as fumigation, GMO and other trade barriers that affect both bulk and container exports. However, Codero noted that domestic consumption is higher and that has kept prices firm for quite some time.

USGC has been tireless in its pursuit of other buyers for U.S. DDGS and has been successful in educating other countries as to the value of U.S. DDGS in their feed rations. USGC has said that the success of their efforts is the result of identifying leading companies in the market, learning the unique concerns and barriers to greater DDGS use, extensive technical preparation, and effective communication with existing and potential customers all over the world.

One example is the increase of DDGS to South Korea. South Korea currently ranks as the second largest market for U.S. DDGS in the current marketing year (September 2017-March 2018), purchasing 639,000 mt, a 6% increase year-over-year, according to a recent report by USGC. South Korea was the third largest market for U.S. DDGS in 2016-17, setting a new record for the fifth year in a row at 979,000 mt. Following significant work by USGC to introduce and advocate for it in South Korea, DDGS is now considered an established and superior feed ingredient there, with 96% of local feed producers using it in their rations.

USGC has said it will continue working to increase U.S. DDGS exports to South Korea and other countries through additional educational programs aimed at protecting existing market share, increasing the inclusion rates in animal diets, and expanding business opportunities between U.S. suppliers and other buyers.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(BAS/BE)


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