Affected by the huge price decrease of corn and anti-dumping on imported DDGS from the USA, import volume of DDGS fell 71% in Sept. year-on-year in China. It is predicted that the import volume of DDGS in China will fall 50 % in 2016, due to the increasing domestic DDGS supply in China, according to analyst CCM.
The imported DDGS in China mainly comes from the USA. According to China Customs, the import volume of DDGS was 272,200 tonnes in Sept. 2016 in China, down 46% MoM and even down 71% compared to that in Sept. 2015.
The accumulative import volume of DDGS was 2.7 million tonnes in China in Jan. – Sept. in 2016, down 48.74% YoY. Though the import volume of DDGS kept going up in the 2012 – 2015, with the all the growth rates of over 25% in the past three years, the import volume declined sharply entering the year of 2016.
Import volume of DDGS in China and the YoY growth rate, Jan. 2013 – Sept. 2016
Source: China Customs & CCM
"The decrease of DDGS import volume in China is mainly attributed to two reasons. One is the falling price of corn in China and the other is anti-dumping on imported DDGS from the USA,' stated Liang Jiawei, editor of Corn Product China News, CCM.
Falling price of corn leads to decreasing DDGS import volume
DDGS is one of substitutes for feed-used corn. In fact, the changing price of corn kept affecting the import volume of DDGS in China. Thus, the increasing DDGS import volume in China in the past was greatly relevant to the expensive corn in China.
Entering the year 2016, the corn price slumped in China. According to CCM's price monitoring, the average market price of corn fell to USD272.52/t in Sept. 2016, down 19.18% YoY.
Monthly market price of corn in China, Jan. 2014 – Sept. 2016
Source: CCM
After the rapid fall of corn price in China, the import volumes of its other substitutes fell as well. Besides DDGS, wheat and sorghum both fell in their import volumes. According to China Customs, the accumulative import volume of wheat was 3,857,800 tonnes in Jan. - Sept. 2016, down 55.76%; as for sorghum, the accumulative import volume was 5,679,400 tonnes in Jan. - Sept. 2016, down 29.85% YoY.
Anti-dumping on imported DDGS from the USA
Since the imported DDGS in China are mainly from the USA, the historical low import volume of DDGS in Sept. is also attributed to China anti-dumping on imported DDGS from the USA.
In fact, earlier in Jan. 2016, China's Ministry of Commerce (MOC) began its anti-dumping investigation on imported DDGS from the USA. After a nine-month investigation, MOC concluded that the USA was dumping DDGS to China.
Since Sept. 23, according to MOC, importers in China shall pay deposit at 10%-10.7% to China Customs as a temporary anti-dumping measure.
Due to the cost increase for imported DDGS, many feed enterprises preferred DDGS produced in China after they adjusted on the formulations, which led to the fall of import volume of DDGS.
DDGS import volume to fall 50% in 2016
Though the import volume of DDGS already keeps falling, the fourth quarter remains tough for DDGS import volume. CCM predicts that the import volume of DDGS in China will fall 50 % in 2016.
As the peak season (winter) for alcohol consumption is approaching, the demand for alcohol encourages the production of alcohol factories, and then increases the supply of DDGS in China.
In addition, the Chinese government began to provide subsidies for corn deep processing enterprises in Jilin Province in Nov. The corn deep processing enterprises whose annual revenue ≥USD2.95 million (RMB20 million) would get a subsidy of USD29.53/t (RMB200/t) when purchasing newly harvested corn.
"More corn purchasing means more subsidies from the Chinese government. With more processing on corn, the supply of DDGS is expected to increase in China,' said Liang.
Moreover, with the falling temperature in winter, the aquaculture industry enters its slack season and has less demand for feed. DDGS, in some way, would be affected.
CCM predicts that import volume of DDGS in China will fall 50 % in 2016, based on calculation of the falling DDGS import volume in Jan. – Sept. 2016 and the said reasons.
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