In 2008, U.S. DDGS exports to China climbed significantly to 6,007 tons valued over US$2.18 million, 78 percent was bound for Guangdong province, the largest feed producer in China. As Chinese government limits domestic ethanol production, U.S. DDGS has great market potential because of its high and consistent quality, free of mycotoxins, and stable supply.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE
BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S.
Voluntary - Public
GAIN Report Number: CH9611
China - Peoples Republic of
U.S. DDGS dashes for China. Mostly to the feed mills of
Grain and Feed
Joani Dong, Director
In 2008, U.S. DDGS exports to China climbed significantly to 6,007 tons valued over US$2.18 million, 78 percent was
bound for Guangdong province, the largest feed producer in China. As Chinese government limits domestic ethanol
production, U.S. DDGS has great market potential because of its high and consistent quality, free of mycotoxins, and
stable supply. The U.S. Grains Council offers assistance to U.S. suppliers to help register products with the China?s
Ministry of Agriculture (MOA) and promotes DDGS use among Chinese millers and livestock farmers.
This report provides a snapshot of the recent trade situation as well as market outlook for U.S. DDGS
exports to South China based on ATO Guangzhou talks during June 2009 with key Distiller?s Dried
Grains with Solubles (DDGS) importers and industry tour members to feed mills that utilize the product.
It began as a trickle in 2007. Since then, U.S. DDGS exports to China have climbed dramatically to 6,007
tons valued over US$2.2 million in 2008.
China?s Imports of U.S. Distillers? Grains
CY 2006 CY 2007 CY 2008
Quantity (metric tons) 0 101 6,007
Value (US$1,000) 0 15 2,183
Source: World Trade Atlas; China Customs data, Commodity Code: 2303.3000
The upward market trend continues in 2009. According to China Customs data, from January to April,
China bought 4,492 tons U.S. DDGS valued US$983,000. According to U.S. Grains Council (USGC), the
US exported 10,000 tons valued US$1.9 million to China in the first five months of 2009, already
exceeding 2008 trade volumes.
After purchasing the first ever U.S. DDGS shipment to China in 2007, Guangdong continues to lead with
imports. According to China Customs, 78 percent of U.S. DDGS enters Guangdong via the Huangpu
port. Qingdao ranks second accounting for 15 percent. The rest enter Beijing, Nanjing, Ningbo and
Despite the leap in imports, China still accounts for a small percentage of U.S. DDGS exports which
reached 4.5 million tons in 2008. Mexico and Canada are the largest importers because their rail systems
are connected with U.S. ones. Shipments can be easily transported directly from U.S. ethanol plants to
Mexican and Canadian feed mills. Across the Pacific Ocean, the largest Asian buyers are Japan, Taiwan
and South Korea. Each bought over 180,000 tons in 2008.
U.S. Exports of Distillers Grains: CY 2006-2008 in metric tons
CY 2006 CY 2007 CY 2008
Mexico 367,386 708,216 1,188,766
Canada 123,022 318,864 771,791
Japan 45,248 83,586 198,014
Taiwan 92,824 134,404 189,451
South Korea 24,587 102,529 184,723
World Total 1,253,653 2,358,248 4,510,383
(Source: BICO; Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics)
Given its large population, growing economy and limited arable land, China has voracious appetite for
protein feed ingredients. In 2008, it imported 37.4 million tons of soybeans to produce oil for human
consumption and soymeal for livestock feeds. In China, Guangdong is the largest feed producer. It
produces 15 million tons of feed per year and requires 600,000 tons DDGS as ingredients. U.S. DDGS has
25-32 percent protein and 10 percent fat. It is a good source of protein, energy and fat as well as
phosphorus and fiber for livestock and aquaculture.
So, what keeps China from buying more U.S. DDGS, and what should the U.S. industry do about it?
Competition from Chinese DDGS
In 2008, China produced over 150 million tons of corn. According to a veteran Chinese DDGS trader,
China can produce 4 million tons of corn based distillers grains yearly. However, due to inefficiency and
low profit, in 2008, China only produced 3 million tons. The key production area is in Northeast China,
comprised of Jilin province (highest quality), Heilongjiang and Liaoning. The largest ethanol plant is the
Jilin Fuel Alcohol Company which can annually process 1.3 million tons corn producing 400,000 tons
fuel and 320,000 high quality DDGS.
Chinese DDGS vs. American DDGS
Chinese DDGS American DDGS
Production: 4 million tons capacity, but actual Now 31 million tons
current and production is 3 million; corn or grain Should increase 7 million tons
future outlook based ethanol production is limited Total 38 million tons
by the Chinese government which
needs to ensure food supply.
Quality A few are good quality: 28 Most are good quality: 25-32 percent
percent protein, 7 percent fat. A protein, 10 percent fat; golden color
large percentage is poor due to heat (highly digestible amino acid); desirable
damage during processing: dark smell like freshly made bread.
color with smell of smoke. Note: Some quality U.S. DDGS have
dark color resulting from excessive
solubles added to DDG.
Mycotoxins Very high for those grown in Very low. Thanks to cold and dry
Henan, Hebei and Shandong, due to weather in U.S. corn belt areas.
high moisture and rainfall during
harvest seasons. It limits DDGS
usage in swine feed. Mycotoxins
may affect sow?s fertility and cause
Supply Unstable, due to inefficient Stable
production and capped production.
Supply will be short in summers
when ethanol plants run out of
Mode of From the North: at ethanol plants All U.S. DDGS are exported to China by containers
transportation all DDGS are bagged (50 kg or 110 in bulk so far.
to Guangdong pounds each), then loaded into Some containers are loaded in
containers at plants. the Midwest such as Chicago and
Ethanol plants to Dalian or Kansas City
other northern ports: in Some DDGS are sent by train in
containers by rail or truck bulk to western ports, then
Northern ports to loaded into the containers
Guangzhou ports: in U.S. ports to Guangzhou: by
containers by vessel vessel
Guangzhou ports to Guangzhou ports to mills: by
mills: in containers by truck truck (unloaded and bagged at
or barge (bagged DDGS may port; or unloaded from
be unloaded at ports or at containers at mills)
mills) Future alternative:
From the central and east U.S. ports to Chinese ports : by large
(Henan, Hebei and Shandong): all bulk vessels such as Panamax bulk
DDGS are bagged and transported ships
Transportation From the North: 20 to 30 40 ? 60 days
From the Central and East: 2-3
Costs per ton Ex Workshop in the North: Ex Workshop: $ 170
(US$): $ 235 U.S. inland transport: 30
1US$=RMB6.82 Transportation: Ocean freight: 50
(Note: These 51 Tariff (5% of CIF): 13
are individual Total : $286 Misc.(Chinese port fees,
transactions in inspection fee &
May 2009. (Guangdong avoids buying DDGS transport to mills): 30
They may not from the Central and East due to Total: $ 293
reflect actual high mycotoxins levels.)
market (by container; if by bulk vessel, prices prices could be reduced)
on average) (If DDGS is unloaded and bagged at
Guangzhou ports, it costs US$10.26 per
It is also noteworthy that in 2008 China exported 203,826 tons DDGS valued US$44.7 million, of which
88 percent (178,511 tons DDGS valued US$37.9 million) went to South Korea which approximates
Northeast China. The rest are mostly shipped to Japan, Taiwan and Southeast Asia.
China?s Exports of Distillers Grains: CY 2006-2008 in metric tons
CY 2006 CY 2007 CY 2008
19,416 59,234 178,511
19,181 13,076 15,757
143 684 3,980
39,838 79,108 203,826
(Source: World Trade Atlas; China Customs)
China?s exports to South Korea can even compete with the US, but U.S. prices have become more
South Korea?s Imports of Distillers Grains: CY 2006-2008 in metric tons
CY 2006 CY 2007 CY 2008
China 19,416 59,234 178,511
United States 24,587 102,529 184,723
(China?s Data Source: World Trade Atlas; China Customs; U.S. Data Source: BICO; Department of
Commerce, U.S. Census Bureau, Foreign Trade Statistics)
To conclude, in South China, U.S. DDGS, in general, is more competitive than normal Chinese
counterparts in terms of quality, appearance, nutritional value and mycotoxin levels. Given Chinese
government limits on domestic ethanol production and demand from other Chinese regions and South
Korea, U.S. DDGS can outpace Chinese ones (even high quality competitors) in Guangdong with
consistent and stable supply.
Shortage of containers
The economic slowdown has impacted U.S. consumer demand for Chinese imported industrial products;
as a result, fewer containers are available to ship U.S. agricultural products back to China.
According to two U.S. exporters, they can only quote for shipments three months ahead of time because
of uncertain container supply and ocean freight prices.
The ultimate solution is to ship DDGS to China by bulk vessels, as for soybeans and wheat to slash
shipping costs and further elevate U.S. DDGS competiveness.
MOA feed registration
According to USGC, under Chinese law, regulated and administered by the Ministry of Agriculture
(MOA), processed feed grains products/ingredients like DDGS must have MOA registration approval
before they can be legally imported. Thus, U.S. DDGS producers who want to export to China must
follow up with an official application, product review, approval and registration process.
After the first shipment to China in 2007, U.S. DDGS has been traded in small and containerized
shipments without proper MOA feed registration. However, neither U.S. sellers nor Chinese buyers are
likely to assume much greater risk associated with possible rejection of unregistered bulk shipments.
This registration requirement presents a significant challenge for future and larger DDGS trade with
In response, USGC initiated a service, as of June 1, 2009, to assist member U.S. DDGS suppliers who
want to obtain MOA registration. Interested members may contact Mike Callahan, USGC senior director
of international operations for Asia, at email@example.com, or Kim Karst, USGC manager of
international operations for Asia, at firstname.lastname@example.org.
Import procedures based on Guangdong trader information
U.S. exporter: Chinese importer:
Submit the following to MOA for GMO 1. Request local CIQ to inspect and
safety certificate approve storage and processing
1. GMO Safety Instructions facilities.
2. MOA GMO Safety
Administration registration form 2. Apply through provincial CIQ for
import permits issued by AQSIQ.
Submit the following to MOA for GMO Note: It takes about one month. The
labeling import permit is valid for six months and
1. Labeling instructions be used for multiple shipments from a
2. GMO labeling application form supplier.
Note: Each certificate/label application
costs 3,000 yuan or US$440 and 25
working days. It is valid for 6 months
and only used for a shipment.
After purchase contracts are signed and shipments initiated, U.S. exporters provide
Chinese importers the following importation documents: Bill of Lading; Packing List;
Commercial Invoice; Weight Certificate; Certificate of Analysis; Phytosanitary
Certificate; Certificate of Origin and Insurance Policy.
Seven to ten days before shipments arrive at Chinese ports, importers should apply with
local Customs for the exemption of value added tax (VAT, 13%).
After arrival, it generally takes three days for Customs clearance and five days for
document submission to CIQ which needs 15 days to complete testing on GMO and
melamine. Before CIQ testing results are ready, DDGS containers may be released and
stored in importers/millers? facilities approved by CIQ.
14 days free demurrage period is needed; a demurrage day costs RMB200 or US$29.
Millers are recommended to build a slope for containers trucks to ride on. It helps DDGS
Once all testing results are cleared, CIQ notify millers that may proceed to use imported
Outlook and promotion
Once MOA registration has been successful, U.S. DDGS market potential shows great promise,
particularly in Guangdong and other South China regions. The most important factor impacting sales
would be price subject to:
1. U.S. domestic demand: Given U.S. livestock farmers are the largest consumers, they have the
most influence on DDGS market prices. For instance, recent DDGS prices are high mainly
because U.S. swine farmers use more DDGS in rations to substitute soymeal.
2. Demand from Mexico and Canada: as above mentioned, they are main buyers of U.S. DDGS.
3. Soybean meal and other feed ingredients prices: Because DDGS provides protein, energy and
fat, its price is influenced by soybean meal (mostly from U.S. beans, crushed in coastal Chinese
cities), corn (mostly from Northeast China), cotton seed meal (Hunan, Hubei and some from
Xinjiang), rapeseed meal (Hunan, Hubei and Canada) and yellow grease (from all over China).
4. Ocean freight: petroleum prices and the recovery of international trade will impact ocean
5. Chinese DDGS prices: According to a trader, millers usually are willing to pay a premium of
RMB50 or US$7.33 for U.S. DDGS over same quality Chinese ones.
Another factor would be the Chinese government?s attitude towards U.S. DDGS imports. Media reports
on waves of criticism about U.S. imported soybeans dominating the China market. As a result, the
government has become cautious and sensitive about grain imports such as corn and DDGS. If repeated
attempts to obtain MOA registration for U.S. DDGS prove futile, that could point to Chinese government
intent to curb imports.
Given DDGS is a relatively new feed ingredient, promotion activities are key to educate
millers/livestock farmers as well as boost sales.
DDGS use in feed rations
Swine Poultry Aquaculture Ruminant
Current usage % 1.5 5 5 10
USGC recommended % 10-20 10-15 10-30 20-40
The above chart indicates there is big room for additional DDGS usage in feed. In South China,
promotion focus should be on swine and poultry (particularly yellow feather broiler chicken) which
consume most manufactured feed. USGC has obtained USDA funds to establish a swine raising technical
extension center in South China.
FAS/Office of Agricultural Affairs (OAA), Beijing
U.S. Embassy Beijing
#55 An Jia Lou Road, Beijing 100600
Tel: (86 10) 8531-3600
Fax: (86 10) 8531-3636
U.S. Agricultural Trade Office (ATO), Guangzhou
14/F, Office Tower, China Hotel
Tel: (+86-20) 8667-7553
Fax: (+86-20) 8666-0703
Agricultural Trade Office (ATO), Beijing
U.S. Embassy Beijing
#55 An Jia Lou Road, Beijing 100600
Tel: (86 10) 8531-3950
Fax: (86 10) 8531-3050
Agricultural Trade Office (ATO), Shanghai
Shanghai Center, Suite 331
1376 Nanjing West Road
Tel: (86 21) 6279-8622
Fax: (86 21) 6279-8336
Agricultural Trade Office (ATO), Chengdu
Suite 1222, 19 4th Section Renminnan Lu
Chengdu, Sichuan, PRC 610041
Tel: (86 28) 8526-8668
Fax: (86 28) 8526-8118
Agricultural Trade Office (ATO), Shenyang
Tel: (86 24) 2322-1198
Fax: (86 24) 2322-1733
U.S. Grains Council, Beijing Office
Unit 10C, 10th Floor, China World Tower 1, No. 1 Jianguomenwai Ave.
Beijing 100004 China
Tel: (86 10) 6505-1314; (86 10) 6505-2320
Fax: (86 10) 6505-0236