USGC: DDGS market continues to diversify

By U.S. Grains Council | September 24, 2018

Major market disruptions dominate the headlines and often spur negative price trends, but buyers around the world continue to expand purchases of U.S. dried distillers grains with solubles (DDGS), according to data from the USDA and analysis by the U.S. Grains Council.

By tonnage, exports of U.S. DDGS are up 2.2 percent year-over-year in 2017/2018 to 10.5 million metric tons, with one month’s data yet to be released. While still down from peak exports of 12 million tons in 2013/2014, the mix of world buyers purchasing U.S. DDGS represents a shifting dynamic in the market.

China dominated the world DDGS market in 2013/2014, importing 6.18 million tons. Since that time—when anti-dumping and countervailing duties were implemented—purchases have trended downward, dropping 78.4 percent in the current marketing year to nearly 157,000 tons. The disruptions in the Chinese market sparked a vigorous response at all levels from traders, end-users, the U.S. government and the Council, which has resulted in the rise of other market players who recognize the true feeding value of this feed ingredient.

The diversification of world buyers for U.S. DDGS is directly attributable to the Council’s long-term market development work. Starting in 2003, Council staff and consultants worldwide started promoting DDGS and educating importers and nutritionists about the value of the feed ingredient. Many markets took years to start purchasing U.S. DDGS, some due to the high Chinese demand. Now the these importers and end-users have the confidence to step into the market and buy, thanks to the 15 years of groundwork by the Council in those countries.

Mexico is now the top buyer of U.S. DDGS, purchasing 1.95 million tons thus far in 2017/2018 (September 2017-July 2018)—up another 3.2 percent year-over-year. The growth in this market is thanks in large part to the Council’s market development work and the trade interrelationships made possible by the North American Free Trade Agreement.

The Council is now working to find even more growth potential in Mexico by identifying pockets of demand that are undeserved or not using DDGS, as was the case with a trade team in September that worked to re-introduce the feed ingredient to key decision-makers from a large Mexican swine producer.

Sales of U.S. DDGS nearly doubled to Turkey last marketing year, following the Council’s efforts to connect end-users with U.S. farmers, grain suppliers and technology companies. While imports this marketing year are currently down 15 percent, Turkey remains the second largest buyer. Imports of 1.09 million tons thus far remain significantly above the year-end totals prior to 2015/2016.

South Korea rounds out the top three largest importers of U.S. DDGS for 2017/2018 marketing year to date. Purchases of 1.06 million tons represent a 16.6 percent increase year-over-year and officially exceed the one million ton mark for the first time.

Growth in the South Korean livestock and corn processing industries has meant the country’s demand for coarse grains and co-products has increased continuously and is expected to grow steadily in the future. Following significant work by the Council, DDGS is now considered an established and superior feed ingredient there, with 96 percent of local feed producers using it in their rations.

Moving forward, the Council is working to increase average inclusion rates by providing additional technical expertise through regional seminars and one-on-one company consultations that provide a broad overview and create awareness of DDGS in swine and poultry diets.

That educational process is also a focus of the Council’s work in Southeast Asia, where DDGS purchases continue to increase. Thailand currently ranks as the fourth largest buyer, with purchases of nearly 870,000 tons that already exceed last marketing year’s total. Thailand’s growth can be directly attributed to the Council’s trade servicing and technical assistance to the country’s feed manufacturers for swine, broilers and layers sectors.

Similarly, sales to Indonesia are up 62 percent from the prior marketing year, continuing a steady trend of increased imports over the last three years as Indonesian feed and poultry end-users examine the value of DDGS with government restrictions on corn imports for feed use. Vietnamese imports of U.S. DDGS have rebounded significantly following market suspensions last year to 930,000 tons, showing even more strong demand across the Southeast Asia region.

Whether just south of the U.S. border or across the Pacific Ocean, one trend in the U.S. DDGS remains true—“When Trade Works, The World Wins.”

Look for a full marketing year end roundup in Global Update next month after final numbers are released.