Commodities: Chinese DDGS buyers back in the market

By Sean Broderick, CHS | January 21, 2015

With February right around the corner, all eyes are now on the Chinese, and whether their buying will resume at volumes that were happening at the beginning of last summer.  With Chinese ministry of Ag announcement that they were now permitting the importation of Syngent's MIR 162, Chinese buyers have been back into the market, particularly in the bulk DDGS market that trades out of the Gulf (New Orleans).  Bulk freight has dropped significantly in the last 6 months, and container freight to China has stayed about the same in that time frame, so it has been much more competitive to sell bulk, rather than containerized product to the ports that can take it.

Domestically, prices have risen with the Chinese buying.  DDGS, which had been as low as sub 90 percent the value of local corn, is now priced closer to 120 percent versus corn.  In the delivered markets on the coasts, and in Texas, DDGS is facing stiff competition from things like soy and canola meals and corn gluten feed.  The price uptick is hurting the domestic demand that had been seen last fall, to the point where the reliance on the export market may be eating into what will get used locally.

Moving ahead, the Chinese demand is manifesting itself in bulk business, which, anecdotally, has already been traded.  The real question is whether that volume will eat into what was traded last year as containers, or whether the bulk will be supplemental to a similar amount of containers that have yet to trade. It would appear as though the market is betting on that.