Focus on Biofuels: DDGS Heads East

A cooperation agreement between the U.S. Grains Council and a Chinese dairy association has expanded the U.S. DDGS market eastward, where the potential for growth is enormous.

The U.S. Grains Council is helping to increase exports of U.S. dried distillers grains with soluables (DDGS), a co-product of the ethanol industry, through its cooperation program with dairies along China's coastline. On March 10, 2009, the USGC signed a cooperation agreement with the Guangdong Provincial Dairy Association. Through their agreement, the USGC provides educational sessions, demonstrations and training in an effort to increase demand for U.S. DDGS in China.

Thanks to the quality of U.S. DDGS, the affordability of the feed ingredient and the marketing efforts by the USGC, demand has risen consistently since 2007 and shows no sign of slowing down.

Cooperation Agreement

The USGC has utilized cooperation agreements for a number of years to expose developing nations to modern feeding technologies and practices. The agreement with the Guandong Provincial Dairy Association was designed to help teach members of the association how to use U.S. DDGS as a ration in their dairy feed.

Cary Sifferatch, director of USGC Beijing, says the agreement is beneficial for both sides, not just the Chinese dairy farmers.

"The agreement says that the Guangdong Provincial Dairy Association will cooperate with USGC on all dairy management training programs within Guangdong Province," says Sifferath. "They help us set up on-farm consultations where we can go directly to dairy farms and show how U.S. DDGS can be used in dairy rations. Also, the association must assist USGC in doing an annual benchmarking survey to see how well our dairy management training programs are meeting the goals we set forth each year."

Mike Callahan, USGC senior director of international operations for Asia, says cooperation agreements such as these are successful because they give foreign markets the opportunity to see the product firsthand.

"Proving to the Chinese dairy associations that U.S. DDGS is a valuable product takes more than simply saying ‘we've been using it in the United States, so you should, too,'" says Callahan. "The demonstrations we provide are necessary because they want to try it, smell it, see how it works."

However, the demonstrations would be useless had the USGC not had a quality product to work with. A main reason that U.S. DDGS exports are increasing is because the quality is superior to that of China's domestic DDGS.

U.S. DDGS Advantage

U.S. DDGS appeals to Chinese dairy farmers for many reasons. It's competitively priced, it's a good source of energy and protein, and U.S. DDGS has very little variability. China has its own supply of DDGS because of its grain-based ethanol and alcohol production, so many feed companies and livestock operations have used domestic DDGS in the past, but were not impressed with the outcome. The USGC's goal now is to reverse the thinking in China that DDGS is a poor quality feed ingredient.

"Chinese DDGS is of a different quality than U.S. DDGS, with lower energy, lower digestible protein and lower available phosphorus levels," says Sifferath. "USGC educates Chinese endusers on the nutritional value of U.S. DDGS and the fact that the United States has a growing supply of DDGS, as the U.S. ethanol industry continues to grow."

According to Callahan, the Chinese farmers who attend DDGS demonstrations almost immediately notice the higher quality of U.S. DDGS.

"We've found that by and large, when doing demonstrations, we don't have to give away the sample," says Callahan. "They're usually willing to buy a container as soon as we show them the product and how to use it."

The price of U.S. DDGS has also impacted its growth. Since Guangdong is part of the coastal region of China, it allows U.S. DDGS to be competitive with other feed ingredients because the imported DDGS are used in the feed of livestock industries located close to the importing facilities. Transportation farther inland China usually makes U.S. DDGS less competitive.