China imports of U.S. DDGS surge; drought hits crop

China's own corn production has suffered from the most severe drought in half a century, while the United States is expecting its largest ever corn harvest this year, they said.

Some Chinese importers were already shipping distillers' dried grains with solubles (DDGS), also a feed ingredient, in large volume or bulk cargoes, in addition to small quantities in containers, Cary B. Sifferath, China Country Director of U.S. Grains Council, told Reuters.

He expects U.S. exports to China in 2009 could potentially reach 400,000 metric tons. Exports so far have reached about 150,000 metric tons, more than 18 times the 8,000 metric tons exported in all of 2008.

"U.S. corn prices and DDGS since June have come down.... With corn prices here in China increasing, it made U.S. DDGS prices very attractive, especially in the southern Chinese market," said Sifferath on the sidelines of a feed ingredient conference over the weekend.

"Some bulk shipments have already happened, and we will see more bulk shipments loaded in September."

Drought in China's major northeast could hurt the country's corn harvest and likely reduce output by 20 million metric tons to 145 million metric tons, according to the forecast by China Shanghai JC Intelligence Co., Ltd, a private consulting firm.

"The quality is pretty good and stable with a higher protein and fat content. It gives a price advantage by replacing some usage of soymeal and corn," said one official with a major feed mill in Shandong, which has recently bought U.S. DDGS.

U.S. DDGS was about 27 percent cheaper than domestic products, which was also lower in protein content.

China's corn prices were supported by Beijing's stockpiling, and recent worries over the drought damage in the northeast have pushed up physical corn prices by 5 percent over the past month.

U.S. corn fell more than 3 percent to an eight-month low in anticipation of a better U.S. corn harvest.