June 25, 2012

China ends distillers' grains probe over increasing feed needs



In an effort to meet its soaring feed needs, China, on Thursday (June 21) confirmed in import data, by rejecting a probe into purchases of US distillers' grains, opening the way for increased purchases when supplies allow.


China's commerce ministry said that four domestic ethanol companies had ditched a request for authorities to investigate US exports of distillers' grains under anti-dumping laws, a call which prompted the start in late 2010 of an official probe.


The dropping of the investigation removes a question mark over the legality of Chinese imports of US distillers' grains, a protein-heavy residue left over from making ethanol from corn, and used in feed, which had prompted a sharp fall-off in trade.


Chinese imports of US distillers' grains, or DDGS, near halved to 1.39 million tonnes last year, according to data from the US Grains Council, which promotes American grain exports. The decline contrasted with soaring imports of US corn itself, as China scrambled for feed for huge hog herd, itself a result of the need to meet increasing demand for pork.


Indeed, import data on Thursday highlighted China's need for feed, showing corn imports of 116,400 tonnes last month, showing what Barclays Capital termed an "impressive rebound" from a weak April figure. Chinese imports of wheat soared to a record high of 556,600 tonnes, amid concerns for a domestic harvest hit by disease, and downgraded by officials last week.


"There have been recent concerns over China's domestic wheat harvest, and the broad strength in Chinese wheat imports this year has been on a combination of substitution to feed wheat away from corn as well as on lowered estimates for the domestic crop," BarCap analyst Sudakshina Unnikrishnan said.


Australia provided most of the wheat, 345,000 tonnes, with the US the source of most of the corn, at 99,000 tonnes, ahead of Thailand on a little under 12,000 tonnes. China's imports of soy, another feed source, reached a six-month high of 5.3 million tonnes. The rising crop imports also suggested that China, which has a reputation for buying on falling markets, "took advantage of the decrease in prices in order to replenish its stocks", Commerzbank said. However, China may find US distillers' grains relatively hard to get hold of for now, given slowdowns and shutdowns at ethanol plants squeezed by high corn prices and sluggish energy markets.


Allendale analyst Paul Georgy reported earlier this week that the reduced production of distillers' grains caused by ethanol cutbacks was "causing cattle feeders to find corn to replace DDGS."


The US Grains Council said it was "gratified" by the close of the investigation "and looks forward to continuing the mutually beneficial trade relationship between the two countries".