U.S. to Double Corn Product Exports as Chinese Demand Expands

The U.S., the world’s largest corn exporter, plans to double overseas sales of a by-product from ethanol distillation in the next five years because of growing demand from feed makers in China, an industry group said.

Total U.S. exports of dried distillers’ grains with solubles, or DDGS, a high-nutrient feed used in the livestock industry, may more than double to as much as 11 million metric tons a year, from 5 million tons now, U.S. Grains Council President Thomas Dorr said in an interview in Tokyo yesterday.

“As China has set an import quota for corn, Chinese demand for DDGS is expected to grow” as the product is not covered by quotas, Ruan Wei, senior researcher at Norinchukin Research Institute Co. in Tokyo, said in a phone interview.

The U.S. is likely to expand corn-based ethanol production under the government’s policy of boosting renewable fuel output, raising DDGS supply, Dorr said. China feed mills are seeking cheaper alternatives to locally produced corn as consumption of meat, milk and eggs expands in the world’s fastest-growing major economy, Wei said.

It’s cheaper for feed mills in southern China to buy DDGS from overseas than to buy corn from the nation’s growing area in the north, she said.

“We all know that there is significant potential in China,” Dorr said. “Demand for high-quality protein is growing aggressively.”

China remains a net exporter of corn under the government’s policy of maintaining self-sufficiency in grains.

Tightening Stockpiles
U.S. sales of DDGS to China may climb to as much as 2 million tons this year from about 600,000 tons last year, Dorr said. The target is in line with the goal set by President Barack Obama of doubling U.S. exports over the next five years.

China’s DDGS purchases may increase to 1.5 million tons this year from 650,000 tons last year, Xu Lihuan, vice president of Dacheng Food Ltd., said on March 19.

Tightening corn stockpiles in China are spurring feed makers in the world’s biggest pork producer and consumer to seek supplies. While the government is wary that imports of large quantities of corn may displace domestic production, a smaller commodity like DDGS may not be seen as a threat, Xu said.

The country is forecast to raise corn exports to 500,000 tons in 2009-2010 from 172,000 tons a year earlier, according to U.S. Department of Agriculture data.

Corn futures for May delivery in Chicago were little changed at $3.4625 an ounce. The price has slumped 17 percent this year as rising output in South America increased world reserve inventories.

DDGS is the nutrient left behind after starch is extracted from grains to make ethanol. A bushel of grain produces 2.7 gallons (10.2 liters) of ethanol and 18 pounds (8.2 kilograms) of DDGS, according to the Kansas Ethanol Web site.

source: businessweek