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Corn+Soybean Digest

DDGs: The Next Demand | Dried Distillers’ Grains Are Next On List of U.S. Exports To China

For years U.S. corn growers have been waiting in great anticipation for China to import U.S. corn. That may happen – but don’t hold your breath. China imports increasing record-large quantities of soybeans and soybean products, but with corn they prefer to be self-sufficient.

However, dried distillers’ grains (DDGs) are another story. Readers are well aware of the sharp increase in corn demand for ethanol in the U.S. As recently as 10 years ago, less than 5% of the corn crop was being crushed for ethanol. This year, that number will reach approximately 36%.

One year ago, China was importing little if any DDGs. In June, the U.S. shipped nearly 325,000 tons of DDGs to China. Sounds like a lot, but really isn’t as of yet. So what is important? The trend.

The Chinese government has made it clear that they want DDGs because of the higher protein value. Many in the industry feel that China represents a 5-million-metric-ton (mmt) market/year for DDGs; possibly even more. At 5 mmt and up, this becomes serious business and huge demand for DDGs.

For this to happen, the ethanol industry needs to ramp up for the next leg so an ample supply of DDGs are available for shipment. Currently, there are not enough DDGs being processed to supply China with their needs. Maybe the answer is ramping up to E15 and consequently increasing overall ethanol production.

Could be very exciting times over the next three to five years.

Ethanol Hurdles
There are some key ethanol hurdles to address. Most importantly, E15 will not be mandated – voluntarily. That means it needs to be economical to pump.

Secondly, and more importantly, is the pump. There aren’t enough of them to supply E15 in mass quantities. Incentives need to be made available to the gas station industry to make sure tanks are available to store ethanol and pumps are available so consumers can select their blend.

For the federal government to announce to consumers that E15 is available isn’t enough. Gas stations need the incentives, not to mention infrastructure, to provide the product and then the ethanol industry will ramp up for the next leg so China can buy the DDGs.

September 2010

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