Affected by the huge price decrease of corn and anti-dumping on imported DDGS from the USA, import volume of DDGS fell 71% in September year-on-year in China. It is predicted that the import volume of DDGS in China will fall 50% in 2016, due to the increasing domestic DDGS supply in China, according to analyst CCM.
The majority of DDGS imported in to China comes from the USA. According to Chinese Customs, the import volume of DDGS was 272,200 tonnes in Sept 2016 in China, down 46% MoM and even down 71% compared to that in Sept 2015. The accumulative import volume of DDGS was 2.7 million tonnes in China in Jan – Sept in 2016, down 48.74% YoY. Though the import volume of DDGS kept going up in the 2012 – 2015, with all the growth rates of over 25% in the past 3 years, the import volume declined sharply coming into the year 2016.
“The decrease of DDGS import volume in China is mainly attributed to 2 reasons. One is the falling price of corn in China and the other is anti-dumping on imported DDGS from the USA,” stated Liang Jiawei, editor of Corn Product China News, CCM.
Falling price of corn
DDGS is one of substitutes for feed-used corn. In fact, the changing price of corn kept affecting the import volume of DDGS in China. Thus, the increasing DDGS import volume in China in the past was greatly relevant to the expensive corn in China.
Entering the year 2016, the corn price slumped in China. According to CCM’s price monitoring, the average market price of corn fell to USD$272.52/t in Sept 2016, down 19.18% YoY. After the rapid fall of the corn price in China, the import volumes of its other substitutes fell as well. Besides DDGS, import volumes of both wheat and sorghum also fell. According to Chinese Customs, the accumulative import volume of wheat was 3,857,800 tonnes in Jan - Sept 2016, down 55.76%; as for sorghum, the accumulative import volume was 5,679,400 tonnes in Jan - Sept 2016, down 29.85% YoY.
Since imported DDGS in China are mainly from the USA, the historical low import volume of DDGS in Sept is also attributed to China anti-dumping on imported DDGS from the USA. In fact, earlier in Jan 2016, China’s Ministry of Commerce (MOC) began its anti-dumping investigation on imported DDGS from the USA. After a 9-month investigation, MOC concluded that the USA was dumping DDGS to China. Since Sept 23, according to MOC, importers in China shall pay a deposit of 10%-10.7% to Chinese Customs as a temporary anti-dumping measure. Due to the cost increase for imported DDGS, many feed enterprises preferred DDGS produced in China after they adjusted their formulations, which led to the fall of import volume of DDGS.
Import volume to fall 50% in 2016
Though the import volume of DDGS keeps falling, the 4th quarter remains tough for DDGS import volume. CCM predicts that the import volume of DDGS in China will fall by 50% in 2016. As the peak season (winter) for alcohol consumption is approaching, the demand for alcohol encourages the production of alcohol factories, which increases the supply of DDGS in China. In addition, the Chinese government began to provide subsidies for corn deep processing enterprises in Jilin Province in Nov. The corn deep processing enterprises whose annual revenue ≥USD$2.95 million (RMB20 million) would get a subsidy of USD$29.53/t (RMB200/t) when purchasing newly harvested corn.
“More corn purchasing means more subsidies from the Chinese government. With more processing of corn, the supply of DDGS is expected to increase in China,” said Liang. Moreover, with the falling temperature in winter, the aquaculture industry enters its slack season and has less demand for feed. DDGS, in some way, would be affected. CCM predicts that import volume of DDGS in China will fall 50% in 2016, based on calculation of the falling DDGS import volume in Jan – Sept 2016 and the said reasons.