Distillers grains market expanding

by World Grain Staff
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Export markets for dried distillers grains with solubles (DDGS) are continuing to expand throughout the world, even as prices are rebounding with the onset of colder weather.

New markets are continuing to develop and expand for the ethanol co-product, thanks in part to the efforts of the U.S. Grains Council (USGC). In five years, exports of DDGS has skyrocketed from 797,000 tonnes to 4.5 million tonnes in 2008. This year, exports are expected to reach 5 to 6 million tonnes.

The lifting of import restrictions on GMOs in the E.U. could positively impact DDGS exports, if the price is right.

Total production of DDGS in 2010 is estimated at 27.5 million tonnes, up from the 24.5 million tonnes produced in 2009. Ethanol plant closures and cut backs in production kept DDGS totals slightly lower than anticipated in 2009.

Several developments late in 2009 impacted prices for first quarter 2010 delivery, noted the USGC, including a decline in corn (maize) prices. This temporarily lowered the price of DDGS by about $6 to $7 per tonne, as did a drop in demand from the U.S. swine sector amid concerns of vomitoxin.

Negotiations between buyers and sellers on mycotoxin limits slowed trade at the end of the year, the USGC said. Ethanol plants in areas of the U.S. known to have toxin problems are testing inbound corn several times per day and also are testing the DDGS coming out of the plant. The U.S. Food and Drug Administration issued recommendations on the maximum levels of toxins acceptable for different breeds of animals.

Colder weather at the beginning of this year was expected to increase daily feed intake while decreasing ethanol plant efficiency, making the future market more bullish.


Total DDGS production is expected to continually increase, reaching 40 million tonnes by 2014-15. Exports will increase at the same time, hitting 8 million tonnes in the same year. The USGC estimates that the demand potential for the feed product is 29 million tonnes.

The top two markets for DDGS are Mexico and Canada, which accounted for 43% of exports, according to an August 2009 report by John A. Fox, Kansas State University, Manhattan, Kansas, U.S. Exports in 2008 grew by 68% to Mexico and by 143% to Canada, and exports were up 32% in Mexico for the first six months of 2009.

Fox said the continued growth in Mexico is due to expansion of Mexican livestock and poultry production. The total market potential in the country, he said, is estimated at 3 million tonnes.

Southeast Asia is another top region for exports, accounting for 25% of U.S. exports in 2008. Leading the way were Taiwan, Japan, South Korea and Thailand. Japan, which is the No. 1 export market for U.S. corn, has potential to increase its DDGS imports to 2.4 million tonnes.

Reopening of the E.U. market to distillers grains, thanks to the lifting of the GMO restrictions, should expand exports. However, it’s unclear right now whether DDGS are competitively priced due to the abundance of feed wheat and rapeseed meal in the European market, the USGC said.

In the 1990s, the E.U. was the dominant market for DDGS and corn gluten, with more than 90% of U.S. exports going to the region. New labeling and traceability requirements in 2004 led to a decline in distillers grain exports. Shipments decreased from more than 560,000 tonnes to 260,000 tonnes between 2005 and 2008.

Turkey finally allowed at the end of 2009 previously contracted DDGS to be released into the market from warehouses. Some shipments had been delayed as a result of the nation’s ban on GMO imports enacted at the end of October. In 2007, the nation had become the third largest importer of distillers grains.

"The lift on the ban brings the assumption that everything will go back to the way it was before. However, the situation is very fluid and we are receiving new information constantly," said Joe O’Brien, U.S. Grains Council regional director in the Middle East and Subcontinent.

Turkey’s prime minister has referred a draft biosafety law to Parliament for discussion that provides the legal basis for resuming the ban enacted in October.


At the end of 2009, the USGC said the second-ever bulk shipment of DDGS arrived in China. The panamax vessel was loaded in the U.S. Gulf and was sold to a local trading company for feed ingredients in Guangzhou, Guangdong Province in China. The vessel contained 20,000 tonnes of DDGS and 32,000 tonnes of U.S. wheat.

The DDGS was sold to local feed mill companies. The USGC said total DDGS imports into China could reach 500,000 tonnes in 2009, compared to 8,000 tonnes in 2008. The high price of Chinese domestic corn and protein meal has made DDGS cost competitive, particularly in Southern China, the USGC said.

China’s import demand for DDGS could easily reach 3 million tonnes, according to an assessment completed by the Center for Agricultural and Rural Development (CARD) at Iowa State University, Ames, Iowa, U.S. A team of U.S. analysts visited China to assess the economics of DDGS use in feed, policy issues and transportation constraints. The group completed a micro-economic analysis on the impact of DDGS in the country.

This analysis showed there is an economic incentive for feed millers and livestock producers to use DDGS in feed rations, with a potential savings of $1 per hundredweight of mixed feed. However, two factors have to be addressed: concerns of mycotoxin contamination and nutrient profile variability; and policy barriers including delays in registration and required testing.

Because of the quality issues surrounding domestic brewers distillers grains, it will be essential to differentiate U.S. DDGS from the domestic product, CARD said.

"More demonstration feeding trials at strategic farms may be necessary to overcome this long-established perception of poor DDGS product quality," CARD said.

Indonesia is also increasing its usage of distillers grains. The USGC reported a sale of 500 tonnes at the end of 2009, but more work is needed to educate selfmixing layer and dairy farmers of the benefits associated with feeding distillers grains.

Current DDGS users in the nation have reported positive results. One dairy cooperative said it fed an extra 1 kilogram of DDGS per cow per day and saw an increase in milk production of about 3.1 kilograms per cow per day.

That cooperative’s success has increased the interest of one local importer who would like to distribute DDGS to farmers, said Budi Tangendjaja, a USGC consultant who traveled to Indonesia to promote DDGS. The East Java region has 150,000 head of dairy cattle. If each animal could be fed 1 kilogram of DDGS daily, the requirement would be 150 tonnes per day.

"This would be a significant quantity for marketing DDGS," Tangendjaja said.

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