June 28, 2005

Asian demand for US Distillers Dried Grains with Solubles on the decline

Demand in Asia for an animal feed made from corn and sorghum during ethanol distilling is likely to continue to fall due to an abundance of other competitive feed ingredients and a decline for their dry-bulk ocean shipping costs.

Distillers Dried Grains with Solubles, or DDGS, which is marketed by the US ethanol industry was imported last year by many Asian feed millers which blended it into feed for the dairy, livestock and poultry industries.

But DDGS is shipped by containers instead of dry-bulk freight and commodity freight rates have been dropping since last December, with the slide accelerating in the last few weeks.

Asian buyers of DDGS need not have to look all the way to US to purchase small quantities of the feed as China's ethanol industry has also been trying to export some of its by-products. The country is expected to increase its DDGS output by 1.1 million tonnes a year by the end of this year.

On Monday, Chinese DDGS was offered at US$170 per tonne, cost and freight to South Korea, while the US DDGS was quoted at US$177/tonne.