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Diverting Trade From China

If China won't buy distillers' grains, other nations are likely to fill that gap fairly quickly.

That's another message coming out of this week's U.S. Grains Council (USGC) meeting in Omaha, Nebraska.

While there is anger and a sense of mistrust among delegates over China's recent delay in importing distillers' dried grains with solubles (DDGS), other nations will likely increase purchases.

One is our neighbor to the south, Mexico, which has long been among our top buyers of both corn and grain sorghum.

"Everybody who tries it in Mexico, they love it," Javier Chavez, the Council's marketing specialist for Mexico told delegates Tuesday.

That contrasts with Chavez' own experience when he was a buyer for a Mexican feed company when he ordered a railcar load of poor-quality DDGS that had the consistency of cement. "It took us four days to unload it," he recalled.

That was 14 years ago. Today, with better quality and consistency, it's a popular feed ingredient that was being used more each year until high prices crimped demand in 2011 and 2012, he said.

"Now that the price situation is recovering, this is a very good opportunity to help secure demand," he said.

The Council also is running a feeding trial to supplement grazing by small cattle herds in the southern Mexican state of Chiapas, where the use of DDGS has improved efficiency.

Chavez said Tuesday that with at least 4 million head of cattle grazing in southern Mexico, there's at least 1 million metric tons of demand for DDGS.

At a planning meeting the day before, the Council's western hemisphere A-team discussed other potential markets for DDGS. The potential is even greater in some central American nations, Kurt Shultz, director of global strategies told the group.

At Tuesday's meeting, Chavez was asked by a Texas farmer if Mexico might be exporting grain sorghum into Texas this year. With DDGS and corn facing trade barriers into China, buyers in that country have purchased most of the Texas and U.S. grain sorghum that would normally be headed to Mexico. But this year Mexican growers have also raised a bumper crop that was harvested in June.

"There’s been two months since the rumors, and I haven’t seen it happen," Chavez replied to the questions about Mexican sorghum exports to Texas.

Sorghum growers in Mexico's Pacific Coast state of Sinaloa have to ship their harvest by truck instead of rail, and the nearest port is designed to import grain, not export it, Chavez said. "It's very hard to see sorghum getting out of Mexico," he said.

Feed grains from the U.S. are currently being diverted from China to southeast Asia as well, said Kevin Roepke, USGC director of trade development in China. Chinese buyers are now working to get corn shipped to southeast Asia, he said.

"It’s a really fascinating structure that is developing on a daily if not hourly basis," he said.

Some importers in China may also be getting around the requirement China announced last week that DDGS be certified free of the MIR 162 genetic trait in corn, an impossible requirement to meet that's viewed almost universally in the U.S. as a nontariff trade barrier.

One exporter of DDGS to China at the meeting, who asked not to be named, told that he was still getting DDGS into the country.

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