Brazil's DDGS enter China, replacing U.S. DDGS diverted elsewhere

China has opened its market to Brazilian distillers dried grains (DDG), a co-product of distilling fuel ethanol from corn that is a cost-efficient ingredient in animal feed. This will further enhance Brazil's dominance as a supplier of China's agricultural imports. China was once a big market for U.S. DDG, but those sales were diverted to other countries after China hit them with steep duties.

Exports of Brazilian DDGs to China are expected to grow at a rapid pace. Brazil's corn-based ethanol production has been growing rapidly, and the Brazilian industry has been eager to gain access to China's market for its DDG coproducts. According to S&P Global Brazil's industry has been working hard to gain access to China's market. A Brazilian official told S&P Global, "[W]e continue to push forward with a major goal: opening up the Chinese market, ensuring even more sustainability for this sector."

An estimate circulated in news media forecasts that Brazilian ethanol production capacity will double by 2033, and DDG exports to China could reach 7 million metric tons. 

A decade ago in 2015 the United States exported over 6.5 million metric tons of DDGs to China valued at $2 billion. A year later China launched an antidumping investigation of U.S. DDGs that resulted in prohibitively high antidumping and countervailing duties (AD/CVD) that shut most U.S. DDGs out of the market. Most of those sales have now been diverted to other countries.

After losing access to China, the U.S. industry was surprisingly successful in expanding DDG sales to other markets. Overall U.S. DDG export sales peaked at 12.7 million metric tons in 2015, more than half going to China. In 2024 the U.S. exported 12.2 million metric tons of DDG, of which only 331,400 metric tons went to China. 

Between 2015 and 2024 growth in U.S. DDG exports to 50 other countries replaced most of the lost sales to China. Exports to Mexico and South Korea each grew by 850,000 metric tons or more, and sales to Indonesia, Turkey, and Colombia each grew by more than 500,000 metric tons after the U.S. lost access to China. Other countries with gains of 100,000 metric tons or more included Vietnam, Japan, Ireland, New Zealand, Canada, the Philippines, and Bangladesh. 

AD/CVD = antidumping and countervailing duties.
Export data from USDA Global Agricultural Trade System.

China was never easy going for U.S. DDG exporters. A 2024 World Trade Review account of China's DDG and sorghum antidumping cases by eyewitness Bryan Lohmar noted that Chinese authorities launched an antidumping investigation of U.S. DDG in 2011, the year after China became the top overseas market for U.S. DDGs. That investigation that was eventually dropped, but DDGs were caught up in China's rejection of a corn GMO variety in 2014.  

After U.S. DDG sales reached $2 billion in 2015, China launched a second AD/CVD investigation that was the nail in the coffin. This case was China's payback for a pair of WTO cases against Chinese grain policies and U.S. denial of "market economy" status for China that year. This time, no Chinese feed companies dared to come forward to testify against the AD/CVD investigation, and China set prohibitive tariffs on DDG from dozens of U.S. ethanol plants. In 2023 China made a point of extending the duties for another 5 years.

U.S. and Brazilian DDGs have both been mostly shut out of China in recent years, so they compete head-to-head in other foreign markets like South Korea. A U.S. industry official told S&P Global that opening China to Brazilian DDGs might actually be good for U.S. sales by scaling back competition in other markets after Brazilian DDGs start going into China. 

Might Chinese authorities also hit Brazilian DDGs with AD/CVD duties? Not likely. But the logic used by China's legal authorities to conclude that U.S. DDGs were dumped in China at unfairly low prices should apply to Brazilian DDGs if their sales to China grow as fast as expected.

Brazilian exports are expected to grow as fast as U.S. exports did during 2009-15. The heated U.S.-Brazil competition in South Korea and other countries reported by S&P Global suggests that Brazilian DDG prices are equal to or lower than prices of U.S. product, which Chinese authorities deemed to be unfairly low. U.S. DDGs are currently quoted at $234 per metric ton FOB. DDGs produced by Chinese ethanol plants are currently about RMB 2,350-to-2,380 ($326-to-$331) per metric ton. 

If Brazilian prices are at or below U.S. prices (with no AD/CVD duty) they are likely to undercut prices of Chinese DDG suppliers, possibly posing a new dilemma for Chinese regulators.