US to double ethanol sales on higher feed demand in China

 

 

The US, the world's largest corn exporter, plans to double overseas sales of DDGS in the next five years as demand from animal feed makers in China expands, an industry group said.

 

Total US exports of dried distillers' grains with solubles (DDGS), a high-nutrient feed used in the livestock industry, may jump to as much as 11 million tonnes a year, from 5 million tonnes now, US Grains Council (USGC) president Thomas Dorr said.

 

"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.

 

Output of DDGS is likely to increase as the US expands ethanol production under the government's policy to boost renewable fuel use, Dorr said. Feedmills in China, the world's biggest pork producer, are seeking cheaper alternatives to locally-grown corn as consumption of meat, milk and eggs booms in the world's fastest-growing major economy, Wei said.

 

US demand for corn to make ethanol will jump 17% this year, according to the USDA on February 9. Ethanol processors will use 4.3 billion bushels in the year ending August 31, up from 3.68 billion the previous year, the department said.

 

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

 

According to Wei, it is cheaper for feedmills in southern China to buy DDGS from overseas than to buy corn from the nation's growing region in the north China remains a net corn exporter under the government's policy of maintaining grain self-sufficiency.

 

Tightening corn stockpiles in China are also spurring feed makers to seek supplies, Xu Lihuan, vice president of Dacheng Food Ltd., said on March 19. 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, he said.

 

The country's DDGS purchases may increase to 1.5 million tonnes this year from 650,000 tons last year, Xu said. China's corn exports may rise to 500,000 tonnes in 2009-10 from 172,000 tonnes a year earlier, according to the USDA.

 

Meanwhile, the USGC is focusing its export expansion efforts on China and other emerging Asian markets like Indonesia because demand from Japan, the largest buyer of US corn, has matured, Dorr said.

 

The world's largest grains exporter faces competition from Eastern European and Central Asian wheat, Door said. Wheat can also be used in animal feed.

 

"Countries like Russia, Ukraine and Kazakhstan will export in the fiscal year ending June 2010 probably 47 million tonnes of grains," he said.

 

The US was the biggest corn exporter ahead of Argentina, Brazil and Ukraine in 2008-09, according to the USDA. Corn shipments from the US may reach 48 million tonnes in 2009-2010, the department forecast.

 

Japan, the world's largest corn importer, purchased 11 million tonnes of the grain for feed use last year, data from the Ministry of Finance show. The US supplied 10.6 million tonnes, or 96% of the total, while Ukraine shipped 212,458 tonnes.