China launches investigation of US feed ingredients

By Aerin Einstein-Curtis contact

- Last updated on GMT

© iStock.com
© iStock.com

Related tags: International trade

China’s Ministry of Commerce (MOFCOM) recently announced that it is starting anti-dumping and countervailing duty investigations regarding imports of US distiller’s dried grains with solubles (DDGS).

The announcement was disappointing, but not a surprise as there has been speculation regarding an anti-dumping investigation for the past several months, said Thomas Sleight, president and CEO of the US Grains Council. The council is a non-profit organization that works to develop grain export markets.

However, he said, it is expected to put a damper on sales of the feed ingredient.

“We are trying to do anything we can to develop alternative markets,” ​he told Feed Navigator. “So buyers on the sidelines may start to jump into that now.”

The council supports current US DDGS trading practices, and there is no dumping taking place, he said. “We’re a fair trader,”​ he added.

Investigation proceedings

A petition for the investigation was brought to the ministry by the China Alcoholic Drinks Association, and suggested that the US was selling the feed ingredient below market prices, said Sleight.

“There is a distorted internal price of corn in China,” ​he said. “Alcohol producers in China are at a disadvantage as they’re not able to sell DDGS at a competitive price because of the internal supply and demand politics.”

This is the second time that China has started an investigation of DDGS trade against the US, said Sleight. The first one started in 2010 and ran into 2012.

That investigation ended up being withdrawn, to not damage the competitive pricing of feed ingredients he said. “Maybe that could happen this time, but I don’t want to be too optimistic,”​ he added.

“We’ll be able to learn from the last one to guide our actions this time,” ​he said. “The most important thing is to be fully cooperative. That’s the first priority.”

The immediate focus will be on providing information for the investigation and developing a unified strategy to respond, said Sleight. The council will work to provide the information requested and show how the numbers work.

The second case, that of countervailing duty, looks at US policy and how that might influence export price, he said.

“These programs don’t have market distortive properties,”​ he said. “We have to work through this process, and meet the deadlines, and have a sense of cooperation in the long run.”

Other outcomes of the investigation could include the ministry imposing duties on future DDGS imports, said Sleight. However, that step likely would inhibit future trade.

“Our main focus is on the investigation stage right now and not looking down the road because that would not be too helpful,”​ he said.

There is no firm timeline for the investigation as it could last a year, or be extended past that deadline, he said, though about six months is an initial estimate.

“We are also confident that our trading practices for DDGS, ethanol and all coarse grains and related products are fair throughout the world,” ​he said in a release. “We stand ready to cooperate fully with these investigations and will be working closely with our members to coordinate the U.S. industry response.”

Import/export market

China has been the largest international importer of US DDGS, said Sleight. “It’s our number one market by far, and we’d like to see what we can do to hang on to that trade.”

From January to November of 2015, the country imported more than half of US’s exportable DDGS supply, reported the Grains Council. It amounted to 6m metric tons costing about $1.5bn.

However, the Council has been working to develop internal use and markets in other countries including Canada, Mexico and several countries in Southeast Asia, he said.

The areas have followed exports of DDGS and have, at times, had trouble supplying the feed product because of the amount imported by China, he said. “We think that they’re going to step in and pick up some of the stock,”​ he added.

Related topics: Policy

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