August 31, 2012
China''s DDGS demand expects strong growth
USDA Economic Reporting Service report stated that demand for distillers dried grain with solubles in China is growing at a robust pace.
While use of the ethanol co-product, widely considered a high quality feed ingredient, remains experimental, the agency expects to see a steady rise as China''s feed demand expands rapidly over the next 10 years, the National Corn Growers Association said on August 28.
"As the people of China continue their climb into the global middle class, they are moving toward a diet rich in both protein and taste," said NCGA President Garry Niemeyer, a farmer from Auburn, Illinois.
"Given the incredible size of its population, a shift in the average Chinese diet can generate impressive demand. US farmers and ethanol producers look forward to working with the Chinese feed industry to fill this need with quality US distillers grains. DDGS represent a tremendous opportunity for so many, truly maximising the usefulness of our corn crop and its ability to feed and fuel a rapidly evolving world."
Forecasting strong growth in the demand for feed, the report indicates this increase will be driven primarily by a shift in the livestock sector from backyard production to commercial production. Already in use as a feed ingredient for poultry and swine, the report concludes that China represents a large potential market for US DDGS.
In light of potential market growth, NCGA recently submitted comments in support of the addition of DDG data to the USDA''s Weekly Export Sales reporting. The letter, which outlined the growth of the market for DDGS, explained that inclusion of this data would "facilitate market transparency and allow our industry and our corn marketing partners with the ability to conduct accurate and timely analysis of US market conditions."
Currently, Chinese hog feed rations including DDGS do so at a 10-12% ratio. In poultry rations, inclusion is generally limited to 5-10%. Despite the low inclusion rates, the sheer size of these industries could generate significant demand given favourable trade circumstances prevail.
The report notes a few key constraints which could limit future growth of DDGS exports to China including slower growth in the US supply of DDGS and uncertainties about Chinese policy. A slowing in the growth of the corn ethanol industry in the US could result in the former circumstance. In addition to possible barriers created by Chinese policy, the availability and price of other substitute feed ingredients, such as the by-products of Chinese alcohol production, could also limit growth.