China Opens Dumping Probe Into Imports of U.S. Ethanol Byproduct

China has begun an anti-dumping investigation into U.S. shipments of dried distillers' grains with solubles, known as DDGS, an animal feed ingredient, another in a list of ongoing trade disputes between the two countries.

China has begun an anti-dumping investigation into U.S. shipments of dried distillers' grains with solubles, known as DDGS, an animal feed ingredient, another in a list of ongoing trade disputes between the two countries. DDGS is a byproduct in the production of corn-based ethanol. The investigation comes after the United States filed a complaint at the World Trade Organization against China over support for its wind-energy manufacturers. 

 

China will investigate alleged unfair trade practices on products imported in the year ended June 30 after receiving complaints from four domestic ethanol producers, according to a statement by China's Ministry of Commerce. The investigation comes just a few weeks before President Hu Jintao is scheduled to visit Washington. 

 

The ministry is expected to conclude the probe within a year, the ministry's statement said. The probe may be extended under exceptional circumstances to June 2012, it said. 

 

The popularity of using U.S. DDGS as a feed ingredient in dairy, beef, swine and poultry feeds has been increasing across markets worldwide. China is leading the way in imports, largely because of its quality, affordability (especially as an alternative to higher priced domestic protein options) and nutritional value. In China, domestic DDGS is mainly a byproduct of liquor production, not ethanol, and thus lacks the consistency and quality control of U.S. DDGS, industry analysts note. 

 

China's surging livestock production has spurred imports of animal feed ingredients including corn, soybeans and DDGS. China has increased purchasing of the feed ingredient this year after becoming a net importer of corn in 2009 for the first time. China will likely import a total of 3.17 million tonnes of DDGS in 2010 and the largest DDGS importer from the US, according to figures cited by the Xinhua News Agency.  

 

China imported only 640,000 tonnes of DDGS in 2009, less than the 2.38 million tonnes during the first nine months of this year. The fast growth is partly due to higher prices of domestic feedstuffs raw materials, which has encouraged DDGS producers to import. According to Xinhua, it is estimated that China is able to feed at most 11.5 million tonnes of DDGS at the current consumption level. But domestic supply can only satisfy 3.5 million tonnes of demand, leaving a need for at least 8 million tonnes of imports. 

 

This is another in a growing list of past and ongoing trade disputes between the two powerful nations, and certainly will not be the last. China's probe will consume some time, and this allows time for the matter to be resolved in discussions between the two countries.  

 

While many traders and others have bandied about the amount of potential U.S. corn exports to China, shipments of DDGS have certainly caught the eye of China's domestic ethanol producers.

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