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Chinese DDGS import tariff hikes spark concern amongst US soybean exporters

China on Wednesday announced an unexpected hike in import anti-dumping and anti-subsidy tarrifs on animal feed dried distillers grains (DDGS), adding another element of uncertainty to the prospects for other US agricultural sales to its main export hub. This follows expected increases on import tariffs for US fuel ethanol earlier in the month. The move augurs further Transpacific combat once the already hawkish Trump administration takes the reigns on US trade relationships next week.

However, China’s boost to ethanol and DDGS tariffs was heavily motivated by the country’s need to reduce domestic corn inventory levels. China currently sit on huge stocks of old, inedible corn, which can only be diminished through increased ethanol and DDGS production domestically.

This is not the case when it comes to China’s need for US soybeans, with soybean imports vitally needed all year round to reach China’s demand for high-protein animal feed. Both US and Brazilian soybean exports are crucial, with product from Brazil filling Chinese import requirements through the US off-season, and vice-versa.  While South American soybean exporters could indeed benefit from any trade-scraps between the US and China through becoming more cost effective for longer, US soybeans will still be needed to supply the Chinese market through most of Q4 and Q1, when Brazilian and Argentinian product is not so readily available.

 

NB 13/1/2016

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