The prospect of China reissuing distillers grains import permits bodes well for the product’s American exporters, but Randy Ives isn’t ready to gloat about it. “We have to be cautious,” says the longtime DDGS marketer and director of ethanol services at Gavilon. “The uncertainty from China has put the industry in a tough position in the past. Collectively, we need to take additional steps to manage the contract performance risk that’s been an issue before.”
Ives and other DDGS exporters are necessarily guarded about China’s decision in late December to lift its ban on Syngenta’s MIR 162, the genetically modified grain trait at the center of the country’s three-month-long constriction on U.S. corn and DDGS. “Of course, it’s huge news for distillers grains, but that doesn’t instantly return them to the pedestal of being an important trade partner to the ethanol industry and to the U.S. ag industry as a whole,” Ives says.
Ives is one of many U.S. DDGS marketers who greeted the late-December announcement from China with incredulity and a stern vow to not get stung again. Less than two years after carrying out a questionable anti-dumping probe that severely disrupted the international DDGS market, China’s feed regulators claimed to have discovered traces of then-banned MIR 162 in cargos of both corn and DDGS in late 2013 and throughout 2014. By mid-September, China was fully enforcing the ban, quarantining large quantities of U.S. corn and DDGS on its docks and turning shipments away at sea. American exporters, logistics providers and Chinese importers together lost millions as communication was lost, contracts were broken and DDGS prices slid more than $100 a ton. By October, imports to China were nil as the commodities world waited for a resolution.
As painful as China’s fourth-quarter DDGS timeout was, Ives says, the market displayed incredible resilience and American traders remained buoyant through it all. “Our product’s global market is larger, more distributed and more stable than it used to be,” Ives says. “We have buyers in 80 countries now, so when China stepped out last fall, customers in other nations stepped in and have stayed. On top of that, we knew China would come back. We just didn’t know when.”