Growing DDGS exports
March 25, 2014
by Susan Reidy
Exports of U.S. distillers dried grains with solubles (DDGS), the animal feed co-product manufactured by dry mill ethanol plants, are on pace to again reach record levels last seen in 2010.
In August 2013 alone, DDGS exports reached a record-breaking 1,049,510 tonnes, an increase of 15% from the previous month. According to U.S. data, exports are on pace to reach 8.9 million tonnes, which would rival the DDGS export record set in 2010.
The U.S. Grains Council (USGC) said Asian buyers have dominated the market, but buyers from other global regions are showing increased interest. Buyers in the Middle East and Central America are making trial buys of the feedstuff, which is the same way Asian buying started, the USGC said.
China was the leading export destination in 2012 at more than 2 million tonnes, according to the USGC. It’s on pace to be the largest importer again this year, with more than 700,000 tonnes in exports during the first four months of 2013.
Other top export locations in 2012 included Mexico (1.3 million tonnes), Canada (538,275 tonnes), Japan (375,246 tonnes), and Vietnam (348,231 tonnes).
USGC, along with multiple U.S. agencies, is working to increase DDGS exports through education, feeding trials and discussions with regulatory agencies.
Total U.S. DDGS exports were up 6% for the first half of 2013, according to the USGC, but showed 9% growth in Southeast Asia. Major gains in Thailand (an increase of 53%) and Indonesia (an increase of 42%) offset declines in Malaysia and the Philippines. Overall, U.S. exports to the region increased 605,000 tonnes, the USGC said.
“In Southeast Asia, DDGS are a beachhead export commodity for the U.S.,” said Adel Yusupov, USGC regional director in Southeast Asia. “While India and South America are our major regional competitors in coarse grains, DDGS is a key product where the U.S. commands a significant advantage due to its unique mix of quality feed protein and energy benefits for poultry and swine. Southeast Asia’s commercial feed production, currently at 60 million tonnes, is about one-third of China’s and growing at 5% to 8% per year, driven by consumers’ preference for higher value calories. We are working to tap into these markets and build demand for DDGS across all animal sectors.”
Insects discovered in a container shipment to Vietnam in 2012 threatened U.S. DDGS shipments. But an agreement on inspections and fumigation negotiated by the USGC, along with the U.S. Foreign Agricultural Services (FAS) and Animal and Plant Health Inspection Service (APHIS) has allowed trade to resume and grow, the agency said. The nation has imported 115,603 tonnes of DDGS in the first four months of 2013.
The insects, the larger cabinet beetle, are common in the U.S. but are on the quarantine list in Vietnam. The Vietnam Ministry of Agriculture’s Plant Production Department (PPD) required fumigation or re-export of that shipment and fumigation of future shipments.
Nguyen Quang Hieu, who is with PPD, was one member of the delegation which came to Export Exchange 2012. He got a first-hand look at the U.S. DDGS supply chain and met with U.S. officials. He said the goal was to find ways to cooperate and improve the situation because DDGS is an important feed ingredient in the country.
“We import a large amount of grain products from the U.S.,” he said. “Solving this would be very beneficial for the U.S. and very beneficial for our industry.”
The USGC is also working to increase demand for DDGS in the Philippines, where high prices have virtually eliminated its use by most end-users and importers. Interest in the DDGS is still strong, so USGC said it will use funds from the U.S. Department of Agriculture’s Market Access Program (MAP) to maintain that interest and increase demand. In 2012, the Philippines imported 160,000 tonnes of DDGS, an increase of 13% from the previous year.
“With the increasing demand in the feed sector, there is room for this amount to grow, but its price in comparison to local corn and imported soybean meal is a major challenge,” the USGC said.
Central American interest
Peru is one area of anticipated growth for DDGS exports. It has the long-term potential to use 350,000 tonnes of DDGS, the USGC said, with the poultry and swine sectors representing 80% of that future demand.
The council’s immediate focus was the dairy sector, which is currently leading the way in DDGS exports. Gloria, the largest milk processor in Peru, is the only importer of U.S. DDGS in that country. Peru imported 18,448 tonnes of DDGS in 2012 and had imported 7,649 tonnes in the first four months of 2013.
“2013-14 should be an excellent year for U.S. DDGS and corn exports to Peru,” said Kurt Shultz, USGC regional director for the Americas. “The abundant U.S. corn crop and a lower corn price are making U.S. corn very competitive in this market. In fact, under the U.S.-Peru Free Trade Agreement, the U.S. has a duty-free quota for 660,000 tonnes of corn and there is no duty on U.S. corn co-products. Promoting U.S. corn and DDGS is part of our strategy to recapture U.S. market share in this vital corn importing market.”
Gloria was experiencing a major logistical bottleneck in expanding DDGS use. The company is not a feed manufacturer nor involved in raw material distribution to local dairies, so DDGS imports by Gloria did not flow smoothly to end users, the USGC said.
An agreement approved in October 2013 between the USGC and Gloria brings together two major raw material suppliers for the dairy sector in a joint DDGS marketing effort. The USGC will provide technical support and marketing to promote DDGS to the two warehouses. Gloria has asked the council to add a third warehouse partner within six months.
If the program works, the dairy sector will increase its use 300%, with the longer-term target to eventually achieve a 500% increase compared to the current market, the USGC said.
“The council is a catalyst, a ‘matchmaker’ with unique capabilities to bring together various players in the marketing chain that otherwise do not know how to find each other,” Shultz said. “In this case we are helping Gloria, the current only importer of DDGS in Peru, to reduce the cost of storing and transporting DDGS, thereby helping Gloria expand its effectiveness in marketing DDGS to Peruvian dairy farmers.”
In Ecuador, the USGC is working to overcome the pre-conceived notions about the quality, handling, storage and purchase of DDGS. Nutritionists and some of the nation’s top feed companies traveled to Costa Rica this spring to meet with local feed producers and learn about its experience of using DDGS over the last 10 years.
The team learned that a group of companies have gotten together to set quality guidelines and import parameters to ensure they received the best product available at the best price, the USGC said.
“In addition, the Ecuadorians were able to learn from local nutritionists about the quality of DDGS and how it is not a substitute of soybean meal and corn,” the USGC said. “Through these meetings, the team was able to really understand and see how DDGS has become an essential ingredient throughout Costa Rica.”
A 12% duty on DDGS imports is making the product less competitive in the Ecuadorian market, but the council said it is trying to find a way to overcome that.
The Middle East and Africa have the potential to be a large market for U.S. DDGS, and new opportunities are opening up with the removal of taxes and inclusion on subsidy lists.
DDGS is now included on the import subsidy list in Saudi Arabia, which is essential for catching the attention of Saudi importers, the USGC said. ARASCO, a Saudi company that produces and markets food and agricultural products, has purchased a bulk shipment of DDGS that should have reached the nation in January.
“With DDGS on the import subsidy list, the Council has undertaken a broad-based effort to educate Saudi feed millers, poultry and livestock producers about this corn co-product,” said Cary Sifferath, USGC regional director in the Middle East and Africa.
An importer in Algeria in October 2013 made the nation’s first purchase of DDGS and corn gluten feed. In 2012, the USGC worked to remove the value-added tax and custom tax that applied to all feed imports in Algeria.
The initial DDGS purchase has led to additional purchases by other Algerian feed millers, the USGC said. It is expected sales will grow into regular annual purchases of 10,000 to 20,000 tonnes of DDGS and CGF combined.
Since neither product has been used before in Algeria, there is a lack of knowledge on how to use them in poultry and ruminant diets. The USGC said it is coordinating its policy work with an effort to educate end-users about the proper use of the feedstuffs.