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June 30, 2014

 

Slowing China demand for feed ingredient jolts US grain, soy Markets

 

 

China has curtailed purchases of dried distillers' grains (DDGs) from the US in recent weeks amid concerns the shipments may contain a genetic modification that Beijing hasn't approved, reported the Wall Street Journal.

 

China's restriction on DDGs imports comes after the Asian country all but stopped buying US corn because some shipments contained the MIR 162 genetically modified trait, developed by Swiss seed and chemical maker Syngenta AG. Since late last year, China has rejected some corn and DDG shipments because authorities said they contained the banned GMO strain. The rejections, including more than 1 million tonns of corn, have hurt profits for US grain traders including Cargill Inc. and Archer Daniels Midland Co.

 

Some of the rejected corn shipments have been resold to buyers in other parts of Asia, such as Vietnam, South Korea and Japan, according to the USDA. However, it is much harder to divert shipments of DDGs, as China is the largest buyer of the feed ingredient from the U.S. by a large measure.

 

According to people in the grain industry, China stopped issuing new import permits for DDGs several weeks ago. The move has caused prices of the ingredient to slide about 19% in the United States since June 3, according to Agriculture Department data.

 

The wider availability of the product in the United States has pressured prices for competing animal-feed raw materials, including corn and soybean meal. Corn futures have dropped 5% this month.

 

Futures for soybean meal, widely fed to hogs and chickens, have dropped about 7% this month. Both DDGs and soybean meal are rich in protein, so livestock feeders are expected to substitute DDGs for the meal as prices fall.

 

The United States is expected to produce 42.9 million tonnes of DDGs in the 2013-14 season ending August 31, up 8.7% from a year earlier, according to Iowa State University data. About one-quarter of the DDGs produced in the United States will be exported.

 

China has been a big buyer in recent years, accounting for a third of US exports last year. The country more than doubled its imports to 1.85 million tonnes in the first four months of this year compared with a year earlier.

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