Focus on Biofuels: DDGS Heads East

Growth Potential

Although right now the coast is the primary location where U.S. DDGS demand is increasing, there is great potential for it to increase elsewhere. The upward trend has already begun. In 2007, China imported around 100 metric tons of U.S. DDGS. In 2008, China imported 8,500 metric tons of U.S. DDGS, and thus far in 2009, China has imported roughly 4,400 metric tons. And there is still potential for China to import much larger volumes.

"We have already seen the Guangdong Dairy Association become a repeat buyer of U.S. DDGS to supply to several dairy farms throughout Guangdong Province," says Sifferath. "We hope to repeat similar experiences in the dairy farming areas of Shanghai."

The potential for U.S. DDGS export growth is immense, but will require some targeted marketing to reach its full potential.

"Realistically, we think U.S. DDGS sales could reach 100,000 metric tons within the next couple of years if some of the constraints to DDGS imports can be overcome," says Sifferatch. "So far, we have only penetrated a small part of China's dairy market, with around 14 million head of cows [total of milking and replacement heifer numbers] in 2008. A big portion of China's dairy industry is in the Northeast part of China, and farther inland, so that is why we are tying up our dairy management training programs with our DDGS promotion programs in coastal areas where U.S. DDGS are more competitively priced. We've learned that you have to be more specific in marketing your product where you think it will be realistically competitive."

Another factor that may inhibit U.S. DDGS sales from reaching its full potential is the new Chinese regulations on U.S. DDGS.

Possible Barrier

According to Callahan, one barrier constraining growth is the regulations imposed on U.S. DDGS by China's Ministry of Agriculture. It considers DDGS from the U.S. a new feed ingredient, despite the fact China produces DDGS domestically.

Ethanol plants in the United States should prepare to register their plant for full feed registration with the Ministry of Agriculture in order to export the DDGS to China.

"This is one of the major constraints that USGC is currently working on as we feel it will keep China from becoming a larger market of U.S. DDGS," says Sifferatch. "USGC in China is already working on this problem and should have some potential assistance to offer to USGC member companies who want to register their ethanol plant for export of DDGS to China. Currently the smaller shipments of U.S. DDGS [200, 500 or 1,000 metric tons at a time] are coming to China without any feed registration, but to move to larger shipments, feed registration will be needed."