DDGS demand seen to affect US corn exports

Soaring demand for distiller's dried grains represents an increasing threat to America's corn exports, according to US officials.

Demand for distiller's dried grains, or DDGs, is soaring in Canada, China and Mexico, where they comprise an increasing shares of rations for animal feed.

While good news for bioethanol plants, which produce distiller's grains as a by-product of refining fuel from corn, the uptick is undermining exports of corn, the USDA said.

"Corn exports are forecast lower due to greater competition from distiller's dried grains," the USDA said, explaining a US$0.5 billion cut to US$9 billion in its forecast for US corn shipments in 2010, leaving them on track for an on-year decline.

The department raised its forecast for the feed and fodder category, which includes distiller's grains, by US$200 million to US$4.8 billion, with volumes set to grow by 12% over last year.

The forecast come two weeks before CME Group, the operator of the Chicago futures exchanges, is due to launch distiller's grains contracts. The move will allow corn refiners to turn to the markets for selling both their major products - ethanol and distiller's grains.