China trade mulling US DDGS container buying despite tariffs

China’s animal feed sector could be mulling a return to buying US DDGS, trade sources told Agricensus Tuesday, despite the corn-based feed pellet facing ongoing Chinese import tariffs and stiff competition from relatively cheap corn prices.

Despite the Phase One trade deal with the US, China has maintained punitive sanctions on DDGS, which are produced as a by-product of corn-based ethanol production, after concluding an anti-dumping investigation nearly five years ago.

“I do think they are beginning to enquire about containers,” one US-based source said of potential Chinese interest, with a second US source agreeing.

“I’d agree that they’re ‘looking’… hard to see how DDGS compete with corn while the tariff is still in place in China,” the second US-based source said.

China was the world’s biggest importer of US DDGS prior to levelling sanctions in 2015, but volumes since the duties were imposed have dwindled.

However, the country is believed to be facing a shortage of corn domestically and is thought to have curtailed the expansion of its corn-based ethanol production as it battles to balance its supply.

In the absence of China, Mexico has become the world’s biggest importer of US DDGS, importing 2 million mt in 2019, according to the US Grains Council, while South Korea and Vietnam have also increased imports in recent years, with both now importing around 1.2 million mt each.

“There are rumours that China may open US DDGS again,” one Vietnam-based source said, citing trade sources in China, with any expression of buying likely to drive DDGS prices higher for all importers.

“We have heard rumours like that several times in the last two years… let’s see how DDGS prices react,” the Vietnam-based source said.

China has embarked on heavy buying of US corn in recent months, locking up 2.3 million mt in old crop corn sales and a whopping 7.5 million mt at least from the 2020/21 marketing year to date.

But DDGS and ethanol, both of which were heavily tipped to benefit from the US-China trade deal signed back in January, have seen little in the way of purchases.