China steps up on DDGS imports

China's imports of Distillers Dried Grains with Solubles (DDGS), a corn ethanol byproduct used for manufacturing animal feeds, have surged in recent months and could potentially reach 200,000 tonnes this year, from just 6,740 tonnes in 2008, analysts said Monday.

"The rise in China's DDGS imports from the US is mainly because of the price advantage; China's domestic corn price is currently higher than in the US," said Li Qiang, general manager of Shanghai-based JC Intelligence Co.

"US ethanol production has been increasing, which means there is a large supply of DDGS," Li added.

China's DDGS imports from the US are estimated around 150,000 tonnes so far this year and could potentially reach 200,000 tonnes amid expectations of a drought-related cut in corn output and higher demand for animal feed tracking a recovery in the livestock farming industry, Li said.

The ongoing drought in China's northeast region could cut domestic corn production by as much as 20 million tonnes this year, from 166 million tonnes in 2008.

However, China is unlikely to import corn despite the cut in output, market observers said.

"Two years of stockpiling by the government have resulted in corn inventories of around 30 million tonnes, which more than compensates for any potential shortfall," said a Singapore-based trader with a major global commodities trading firm.