The investigations were announced in January by China’s Ministry of Commerce (MOFCOM) regarding the export of feed ingredient, US distillers dried grains with solubles (DDGS) into China.
The Chinese Ministry of Commerce may be about to announce an initial decision, Tom Sleight, president and CEO of the US Grains Council, told us. The expectation is that such findings would be released before early October, he said.
“They’re under no obligation, but from what we gather, they may be ready to reach a preliminary decision,” said Sleight.
At this point, industry, along with the Council, has presented their information to the MOFCOM, he said. We have “made our cases, our rather strong cases, about DDGS and whether dumping or subsidization has occurred, we don’t think so, but it’s in the hands of MOFOCOM,” he added.
A petition for the probe was brought to the ministry by the China Alcoholic Drinks Association, and suggested that the US was selling the feed ingredient below market prices. “Alcohol producers in China are at a disadvantage as they’re not able to sell DDGS at a competitive price because of the internal supply and demand politics," said Sleight previously.
Investigation details
The Council said in January the allegations are unwarranted and false and that US trading practices for DDGS are fair.
Additionally, the ethanol industry, through the Renewable Fuels Association and Growth Energy, asked the US government to challenge the process used and initial determinations made by the Chinese investigating team. The request came after a series of questionnaires submitted by a group of companies involved in the export of DDGS were found wanting by MOFCOM, potentially leaving them potentially open to punitive levies should China determine the facts support the imposition of antidumping and/or countervailing duties on US DDGS exports.
Potential outcomes
There is no way to predict what the initial result or response may be, he said. “There are a million different options – [it is] fruitless to speculate,” he added.
The investigation also sparked concerns about what it would mean for DDGS sales, said Sleight. Previously, China was the main export market for the feed ingredient.
Throughout the investigation sales to China have continued, he said, but volumes have dipped.
Prices for the feed product also have lowered, he said. “Overall revenue is probably less than it was, because prices have dropped, but companies are still aggressively marketing it so hopefully prices will stay firm,” he added.
From September to August of the 2015 marketing year, China purchased about 3.70m metric tons of DDGS from the US, but for the same time period in 2016 they imported about 2.75m metric tons – a drop of approximately 25%, reported the Council. But total exports are up 6% for the marketing year.
New markets
However, overall sales in the export market have remained solid, said Sleight. The industry saw greater diversity in the last year with larger amounts going to multiple countries including Mexico, Japan, Korea, Taiwan, Turkey and parts of Southeast Asia.
Southeast Asia has had an import growth of 50% to 1.7m tons, making the region the second largest importer, said the Council. Mexico was the third largest purchaser moving 18% from about 1.3m metric tons to 1.55m metric tons.
“We’re projecting a rise in the total DDG sales,” said Sleight. “We think we might be hitting a record in sales for this marketing year – we have to see the final numbers, but things look good.”
The Council has been working on establishing alternative markets globally and lower prices have helped that process, he said. “Once the product is introduced, and they get to know how to formulate feed with it, they kind of become hooked,” he added.
“It performs well in livestock diets, particularly for ruminants and swine,” he said. “People have a lot of success using it – it’s a good feed option all over the world [and], in the US, I think we’ll continue to see strong diversification in this market.”