China Investigating DDG Dumping

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BEIJING (Dow Jones)--China's Ministry of Commerce said Tuesday it has opened an anti-dumping investigation into U.S. exports of distiller's dried grains, a livestock feed that the U.S. farm industry lobby has sought to promote among Chinese feed mills.

U.S. farm interests had viewed the commodity, commonly known as DDG or DDGS, as a tremendous new trade opportunity in China. Imports rose strongly this year amid expectations that the commodity would find favor among Chinese mills over corn as a feedmeal. DDGS are a byproduct of the process of turning corn into ethanol.

Chinese imports of the commodity rose nearly five times this year over 2009, at a time when the U.S. has just cleared a record $1 billion in corn and co-product exports to China.

The ministry plans to look for any evidence of dumping of DDGS, with and without solubles, between last July and June this year, but may widen the window to see if there was any harm to China's industry from 2007 to June this year, it said in a statement.

The investigation will likely be completed by Dec. 28 next year, but the end-date could be extended to June 28, 2012, under special circumstances, the ministry added.

Private sector estimates show China is on track to import about 3 million metric tons of the commodity this year, up from around 640,000 tons last year.

"The government may be focusing on a period when large import volumes were undercutting domestic prices," said Li Dongfa, an analyst with Shanghai JC Intelligence.

Imports mid-year were CNY300-CNY400/ton cheaper than domestic DDGS, Li estimated.

While prices have since leveled, the government may still be moving on the investigation with an eye on assisting domestic DDG mills, said Xu Wenjie, an analyst with Zheshang Futures.

DDGS with or without solubles are used as livestock feed; the solubles refer to additions of sugars to the feed.

The U.S. farm lobby has been aggressively promoting DDGS worldwide as a feedmeal, taking the commodity on a roadshow to Europe and Asia in recent months.

In a November newsletter the U.S. Grains Council had described DDGS as a key trade opportunity for the U.S. in China, crucial at a time when China is expanding meat production as consumption shifts to a higher-protein intake.

The Chinese ministry's latest investigation widens tensions in bilateral food trade, coming at a time when Beijing is keen to retain self-sufficiency in agriculture.

"It's not inconsistent with their anti-dumping action against poultry, but the good news is that they're (potentially) extending the investigation into 2012," an industry participant with links to U.S. trade said Tuesday.

China slapped anti-dumping duties on U.S. chicken this year, accusing the U.S. of subsidizing its poultry industry and "hurting China's domestic industry."

Also this year, China broke with years-long convention to become a massive new net importer of U.S. corn, shipping 1.5 million tons of the grain.

While China announced a robust corn harvest later in the season, the market still expects China may be in the market for more imports.

However, tensions have also arisen on that front. Chinese quarantine authorities last month rejected a U.S. cargo of 54,000 tons of genetically modified corn of an unacceptable strain, China's largest grain trader Cofco Ltd. said.

Industry participants said the cargo still remains in "technical limbo," and that China could still accept it after clearance is obtained.

-By Chuin-Wei Yap and Stefanie Qi, Dow Jones Newswires; 8610 8400 7704; chuin-wei.yap@dowjones.com



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