Kim Dillivan
Crops Business Management Field Specialist
On June 19, U.S. exporters were told (unofficially) that China was temporarily suspending the issuance of distiller’s dried grains with solubles (DDGS) import permits to the U.S., and that cargoes of DDGS imported from the U.S., under existing permits, would undergo more stringent testing for the presence of non-approved genetically modified material. According to the U.S. Grains Council, existing import permits are still being honored by China and new contracts are being written. Chinese officials have made no formal announcements and it is unclear whether any U.S. DDGS shipments have failed to pass inspection.
China is a major importer of U.S. DDGS (Figure 1). According to the U.S. Grains Council, China replaced Mexico in 2012 as the largest importer of U.S. DDGS, and in 2013 accounted for 46% of U.S. DDGS export sales. The Chinese have a large and increasing demand for livestock feed and feed prices in China are above world levels. According to traders, Chinese buyers are still interested in obtaining both DDGS and corn from the U.S.
Figure 1. Monthly Intake of U.S. DDGS
![](http://igrow.org/up/articles/9679.png)
Source: U.S. Grains Council
DDGS are the co-product of ethanol production and contain 10-12% moisture. High in energy and protein, DDGS are an important feed for beef and dairy industries, and are increasingly being utilized in poultry and swine rations. DDGS are readily transportable and world demand continues to grow. For example, in 2005/06 the U.S. produced about 10 million metric tons (MMT) of DDGS and exported almost 2 MMT. By 2012/13 U.S. DDGS production was approximately 38 MMT and exports were 11 MMT. In 2011, South Dakota was responsible for about 7.5% of the U.S. production of ethanol. South Dakota State University has led the world in distiller’s dried grains research as a feed for livestock.
Reports of the potential disruption in U.S. DDGS exports to China follow a breakdown in corn trade between China and the U.S. In November 2013, Chinese officials said that undisclosed amounts of a genetically modified corn were detected in shipments from the U.S. The genetic material had not been approved by China and the shipments were subsequently rejected.
The corn biotech trait in question has been approved for production in the United States, Argentina, and Brazil, among others, and by Japan, Korea, Taiwan, Canada, Mexico and the EU for import (U.S. Grains Council). Approval has been pending in China for more than four years, and despite formal approval, China has been accepting product containing the trait during that period. However, in November 2013, China began enforcing a zero tolerance policy for presence of the material in corn.
China does allow the importation of commodities grown from genetically modified seed, but only after the specific genetic material has been approved. Corn shipments that are rejected by China must be returned to the exporting country or sold elsewhere. Since November 2013, China has repeatedly rejected shipments of U.S. corn and by January 2014 corn exports to China had essentially fallen to zero (Figure 2).
Figure 2. Monthly Intake of U.S. Corn
![](http://igrow.org/up/articles/9679-1.png)
Source: U.S. Grains Council
In response, China has agreed to import corn from Brazil, Argentina, and Ukraine. China signed a corn import agreement with Brazil in March likely detailing amounts of genetically modified corn allowed from Brazilian exporters. In 2012 China signed similar agreements with exporters from Argentina and Ukraine.
Export markets represent an important destination for U.S. corn. Table 1 shows U.S. corn exports, domestic production, and exports as a percent of production for the past four years. Other than in 2012/13, U.S. corn exports have been 12 to 14% of U.S. domestic production. These exports complement the approximately 75 to 80% of U.S. annual corn supply going to domestic feed, fuel, and food uses. South Dakota produces approximately 5% of our nation’s corn.
Table 1. U.S. Corn Exports and Production by Marketing Year
| 10/11 | 11/12 | 12/13 | 13/14 est. |
Exports (million bushels) | 1,835 | 1,543 | 731 | 1,900 |
Production (million bushels) | 12,447 | 12,360 | 10,780 | 13,925 |
Exports/Production (%) | 14.7 | 12.5 | 6.8 | 13.6 |
Source: USDA WASDE reports for June 2012, 2013, and 2014
These developments are potentially troubling for U.S. corn producers. Although China traditionally imports significant amounts of soybeans and soybean meal from the U.S., in the coming years increases in China’s domestic corn production are projected to be surpassed by increases in its demand for corn. Obviously, U.S. and South Dakota corn producers welcome opportunities to meet that increasing demand.
Source : SDSU