U.S. grain trade to China continues despite market uncertainty

China continues as top exporter for U.S. sorghum and DDGS despite uncertainty.

China continues to be the top importer of U.S. distiller’s dried grains with solubles (DDGS) and sorghum despite the current uncertainties in the Chinese economy and uneasiness about trade with the country in the international grain market, according to the U.S. Grains Council (USGC).

Factors contributing to the uncertainty include a very large corn harvest in China set to begin soon, a new regulatory system for grain importers and an ongoing discussion about the support price of corn in China.

“The announcement of a new registration system in China for grain importers has generated anxiety about the potential for additional regulations for grain imports,” USGC said. “Despite this, imports are continuing and most Chinese importers are working through these new regulations.”

Additionally, USGC said there is ongoing discussion that the Ministry of Agriculture will reduce its support price for corn, which could reduce the competitive price of U.S. coarse grains in China. The government has yet to announce the new measures, and disagreements over the level of the purchase price and how the policies should be revised may further delay an official announcement.

“Uncertainties over pricing, purchasing criteria and market reaction are also causing traders to be cautious about forward contracting,” USGC said. “However, even if a price reduction occurs, it is likely that domestic corn in China will be above the international price of landed U.S. sorghum, corn, and DDGS.”

Even with these potential changes, vessels of U.S. sorghum and DDGS continue to arrive in China. In fact, as of Aug. 27, USGC said China had imported 8.3 million metric tons (327 million bushels) of U.S. sorghum, a 4 million tons (157 million bushels) increase over the same period last year, in addition to 4.2 million tons of U.S. DDGS for the January-July 2015 time period, a 20% increase for the same period last year. This makes China the top U.S. export market for these two products, according to USGC.

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With the U.S. sorghum harvest approaching, base price FOB Gulf for U.S. sorghum has dropped, which USGC said is an opportunity to highlight the value of U.S. sorghum to Chinese customers. Upcoming seminars to promote U.S. sorghum and DDGS in two provinces in China already have more than 200 registered participants from the swine industry, the group said.

In addition to these two seminars, USGC consultants are also scheduled to speak at a symposium organized by ATO Chengdu in Sichuan as a response to emerging interest in sorghum and DDGS in that province.

“The responses from those interested in attending indicate there is still significant demand, and untapped markets, for U.S. DDGS and sorghum in China,” USGC said. “The future of trade with China is expected to experience continued periods of uncertainty. In the interest of U.S. coarse grains exports, the Council is actively tracking and promoting U.S. grain exports in this vital market.”

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