Feed use of dried distillers grains (DDG) is expected to increase 6% in 2013-14, largely due to robust exports of the product, particularly to China, according to the International Grains Council. The U.S. remains the largest producer of DDGs by a wide margin. While U.S. consumption by the beef and dairy sectors is still expected to account for the vast majority of DDG use, more DDGs are expected to move into export channels in 2013-14. U.S. DDG exports are up 67% over the 2012-13 marketing year so far this year, largely due to increased sales to China.
The rapid growth in Chinese DDG demand can be chalked up to "rising meat production, structural changes to the livestock sector and price considerations," IGC explains. Contrary to the U.S., DDGs are primarily used in the poultry and swine sectors in China.
While DDGs are subject to a 5% import tariff, the byproduct is exempt from the 13% value-added tax (VAT) that applies to corn and soymeal imports. Plus, DDGs are not subject to tariff rate quota system regulations. IGC also notes that "importing costs are reduced by transporting DDG using otherwise empty shipping containers heading back to the region from the U.S."
While a few cargoes of DDGs have been rejected by China due to the presence of an unauthorized genetically-modified trait, DDG trade as a whole has been largely free of disruption. In fact, customs data indicates an acceleration in Chinese DDG imports for January.