by Ken Root
China has imposed duties on U.S. Distillers Dried Grains (DDG). So, high that its believed the 1.6 billion dollar market will be gone.
Distillers Dried Grains with Solubles are a by-product of the U.S. Ethanol Industry. The product has shown to be a very palatable livestock feed, and its abundance has made it cheap. So cheap, that DDG’s can be shipped half way around the world and compete with locally grown corn.
That appears to be the problem and one a centrally run economy can quickly fix.
Preliminary tariffs on U.S. DDG, totaling more than 40 percent, were imposed by China several months ago, causing the price of DDG’s to drop by about 30 percent, or about $60 per ton, affecting the 36 million tons of DDG produced annually in the U.S. The combined tariffs, now totaling more than 80 percent, will effectively close the Chinese animal feed market to U.S. DDG.
Unless another market can be found, the tariffs will cost the U.S. ethanol industry almost two billion dollars per year.
The U.S. DDG industry cooperated with the Chinese tariff investigation, even hosting Chinese Ministry of Commerce (MOFCOM) investigators at several U.S. production facilities, including the Marquis Energy facility in Illinois. Nevertheless, China ignored the factual data provided by the U.S. industry, disregarded WTO trade rules and used its own unknown calculations to impose these punitive tariffs.
In early January, China also stated its intention to raise its 5 percent tariff on U.S. fuel ethanol to 30 percent. The ethanol industry, largely owned by corn growers across the U.S., is a significant contributor to the balance of trade between the U.S. and China.