Agri-product sees major export growth to China

By: | at 08:00 PM | Channel(s): International Trade  

Production increases, growth in Chinese industry yields boomBy Peter A. Buxbaum, AJOTA co-product of the production of ethanol in the United States has emerged as a major export growth opportunity in the trade with China. US exports to China of distiller’s dried grains with solubles (DDGS) registered a dramatic increase in 2008 and are expanding exponentially this year. As US ethanol production has expanded, thanks to expanding requirements to use of oxygenated fuels such as ethanol-gasoline blends to reduce air pollution from automobile emissions, DDGS is being promoted as an affordable, high-quality feed ingredient to global livestock industries.
The United States Department of Agriculture reported exports of 8,500 metric tons of DDGS to China in 2008, an increase from 1,200 tons in 2007. Through June of this year, as many as 20,000 tons of DDGS have been shipped, according to the US Grains Council, a Washington-based industry group, and 135,000 tons have been sold to China for August and September shipments.
In terms of overall trade, US exports to China grew 10 percent last year, and China is now the third-largest export market for the US Over the past five years, US exports to China have doubled. The trade surplus in the US service industries has maintained an annual growth of 36 percent.
Distiller’s dried grains with solubles are the dried residue remaining after corn is fermented with yeasts and enzymes to produce ethanol and carbon dioxide. After complete fermentation, the alcohol is removed by distillation and the residues are dried. Around 98 percent of the DDGS in North America comes from plants that produce ethanol for oxygenated fuels, according to research provided by the University of Minnesota. The remaining fraction is produced by the alcohol beverage industry.
Approximately 3.5 million metric tons of DDGS are produced annually in the US One-quarter of that output is produced in ethanol plants in Minnesota and South Dakota, most of which are small, farmer- owned, and less than ten years old. According to research conducted at the University of Minnesota, these plants are utilizing new technology to produce a higher quality DDGS compared to some older and larger ethanol plants.
Historically, the European Union has been the major export market for DDGS, at 700,000 tons annually, with additional export markets, such as Canada and Mexico taking only small additional slivers of the output. DDGS is used primarily as an ingredient in animal feed, primarily for poultry but increasingly for swine.
The continued expansion and industrialization of the pork industry in China is a primary driver for the increased demand for DDGS in that country, according to Han Soo Joo, a professor of veterinary medicine at the University of Minnesota. “This growth will lead to more commercial feed and feed grains need,” he said. Joo has been working with the US Grains Council to present workshops in China to demonstrate how the use of DDGS can reduce production costs and provide health benefits to growing pigs.
At the same time, the growth in US ethanol production—from less than one million metric tons in 2004 to 4.5 million tons in 2008—has meant increasing pressure to find export markets for DDGS. DDGS exports add to the profitability of the US ethanol industry and of US corn growers, whose exports to Europe have fallen in recent years.
“I don’t think there is any question. You have to have a strong export market,” said Jim Hansen, chief operating officer, of POET Nutrition, a DDGS producer in Sioux Falls, SD.
“The next markets to develop are in Asia and North Africa,” said Steve Markham, a merchandiser at CHS Inc., an agribusiness based in Inver Grove Heights, MN. “We’ve really just grazed the surface there. The potential market in China is huge.”
Southeast Asia, and particularly Thailand, is also considered export growth markets for US DDGS. Exports to Southeast Asia are expected to double this year.
The US Grains Council is promoting DDGS in China by

Peter Buxbaum's avatar

American Journal of Transportation

More on Peter Buxbaum
Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.