China Weighs a Spat Over U.S. Feed

If ever there were a commodity that needed a bit of publicity to get around its clunky name, distillers dried grains might just be the candidate.But U.S. farm industry proponents of the grain, created when starch and ethanol are extracted from corn, for use as a livestock feed, probably weren’t looking for the kind of publicity caused by China’s launch Tuesday of an antidumping probe into U.S. exports of the distillers dried grains.

The U.S. is the world’s largest exporter of this corn-ethanol byproduct, which for short is also called, somewhat unimaginatively, DDG (when sugars, or “solubles,” are added, the initials become DDGS). U.S. farm lobbyists have been pushing DDG worldwide as a feedmeal for pigs and chicken, in addition to cattle, promoting its high concentrations of protein, fat and fiber as an alternative to corn.

China is the world’s largest buyer of DDG, as it is for so many of the world’s other commodities. Unlike corn, DDG isn’t subject to China’s rules on import quotas and genetic modification. Since the latter half of 2009, Chinese demand for DDG surged. By the middle of the year, U.S. DDG exports were already up 53% over the same period last year. Chinese imports this year of the feed are on track to rise nearly five times over 2009 as a whole. In June, the U.S. Department of Agriculture’s Foreign Agricultural Service was already calling “China’s emergence as a key growth market… (an) important driver behind the surge in shipments.” (PDF)

So wouldn’t all this make for a chummy trade relationship?

Not quite, it would seem—perhaps because China is also eager to both ensure self-sufficiency in food and develop its own corn-related agribusinesses.

Beijing doesn’t have a slam-dunk case. At current prices, DDG imports are slightly more expensive than the domestic product, which weakens the dumping argument.

This might be why China’s Ministry of Commerce focused its DDG dumping probe on the period from July last year to June this year – a time, analysts noted, when U.S. DDG import prices undercut domestic DDG by 300 yuan-to-400 yuan a ton. The ministry also gave itself an unusually long window of investigation, up to the end of 2011, and if necessary up to mid-2012, a move that could be positioned to guard against a resurgence of cheap imports.

Those campaigning to make DDG a U.S. export commodity of choice will have that long to prepare a defense – and, during that time, perhaps to also come up with a better nickname for DDG.