In Demand Around the Globe

Although China is the big story in distillers grains exports this year, many growing markets are helping support this crucial outlet for U.S. producers. Experts believe that 2013 could top 7.42 million metric tons, the amount exported last year.
By Holly Jessen | November 20, 2013

U.S. distillers grains is in demand all over the world, with export figures shaping up for a possible comeback, possibly even reaching record numbers. After hitting a high of 9 million metric tons (mmt) of distillers grains exported in 2010, the numbers dropped to 7.64 mmt in 2011 and 7.42 mmt in 2012. By mid-October, with data available for only the first seven months of the year, it's looking like another good year with 4.87 mmt of distillers grains exported year-to-date. In the month of July alone, nearly 1 mmt had been exported, the highest level of the year and the second-highest monthly total on record. “I think it’s definitely safe to say that, at a minimum 2013 will be the second highest export year on record for distillers grains,” says Geoff Cooper, vice president of research and analysis for the Renewable Fuels Association, adding that it’s not implausible that the total could reach the same level or higher than last year.

Alvaro Cordero, manager of global trade for the U.S. Grains Council, says he believes exports will top last year’s total. After all, through July of this year 6 percent more distillers grains had been exported compared to the same period last year. (By press time, in late October, the numbers for August were still delayed due to the partial government shutdown earlier in the month.) And, Cordero adds, the future for distillers grains exports looks bright. “It’s very likely that next year we will enjoy possibly a little bigger marketplace,” he says. 

There are reasons exports were down in 2011 and 2012. The first hit was the Chinese antidumping case, which was resolved favorably, opening the way for exports to that country to shoot back up. In addition, the 2012 drought did have an impact. “We had reduced grind rates at ethanol plants, so we had less distillers grains production than we had on 2010 and 2011,” Cooper says. “So we had less distillers grains available, so it made sense that we would be exporting slightly less as well.”

Exports are a tremendously important market for distillers grains, supporting profitability for ethanol producers. Prior to 2006, less than 10 percent of U.S. distillers grains, or only about a million tons annually, were exported, he says. Then in 2010, the number ramped up to about 25 percent and has stayed relatively stable year after year. “That’s huge,” he says. “As with any commodity, it’s that export demand that really sets your price and supports domestic pricing as well. So export demand for distillers grains has been crucial.” 

Cordero agrees. “There’s no question that exports maintain prices, that exports provide revenue, that exports are crucial,” he says. “Exports will allow us to maintain a healthy balance sheet in our ethanol industry.” Every year, USGC advisory groups are asked if the council should continue its work in promoting distillers grains exports to international markets, and every year the participating industry answers yes. “It shows not only that we’ve been very successful but also the importance that we have to maintain our markets internationally, abreast of changes,” he says. 

USGC’s efforts to expand international distillers grains markets aren’t just about sell, sell, sell, Cordero says. Education is a key factor. For one thing, the ethanol industry is still evolving and the way coproducts are produced has changed in many ways over the years, including the impact of reduced-oil distillers grains due to the fact that the majority of U.S. ethanol producers now extract corn oil as another coproduct.  “Our products are high-quality, but they evolve,” he says. “It’s so important to educate the market so they can effectively buy, in an intelligent way, the products they are sourcing out of the U.S.” 

Important Markets
According to USGC’s 2012 annual report, China imported a total of 29.6 percent of all exported distillers grains in 2012, putting it in the No. 1 slot. Next came Mexico at 20.3 percent. Canada, Vietnam and Korea came next, at 8.5 percent, 6 percent and 4.5 percent of exports. The line-up in 2013 is similar, with China, Mexico and Canada again in the top three spots so far this year. 

Growing exports to China is the main reason total distillers grains export numbers could hit a record in 2013. Since February, China has been the No. 1 destination for the domestically produced coproduct, Cooper says. Cordero points out that, through July, distillers grains exports to China are up 16 percent compared to last year. (For more information about distillers grains exports to China, see “Destination China” by Chris Hanson, starting on page 40.)

On the other hand, while Mexico and Canada  are still what Cooper calls bread and butter distillers grains markets, both are down significantly, while remaining in the top two positions for distillers grains exports. Due to higher distillers grains prices earlier this year, both countries cut back on buying, with exports to Mexico dropping 26 percent and Canada 16 percent in the first part of the year, Cordero says. All in all, with China’s appetite for distillers grains only increasing, decreased exports to these other two major markets are nearly offset, Cordero says. Again, looking at the first seven months of 2013, Mexico imported 246,000 metric tons less than it did in the same period last year and Canada reduced its imports by 59,000 metric tons while China ramped up its imports by 244,000 metric tons. Cordero expects the numbers for Mexico for the second half of the year to be more favorable, however. “My expectations are that probably it’s going to pick up a little bit more,” he says. 

Although China is certainly a growing and important market, it’s not the only interesting story. A very large portfolio of countries—nearly 80 in all—import distillers grains produced at U.S. ethanol plants. “That allows us to mitigate countries that are very important to us, like Mexico and Canada, when they have reduced their importations,” Cordero says. 

Cooper points to other Pacific Rim countries that have been importing growing amounts of distillers grains. “We have seen Japan and Vietnam really ramp up imports of distillers grains in the last couple years,” he says. “Thailand is a market that is emerging. We are starting to see a fair amount of distillers grains being sent to Thailand. South Korea is another very promising export market on the Pacific Rim. Those are all markets where I think we should expect to see continued growth.” 

Cordero talked about growth in some of the same countries, adding that the USGC considers China and Southeast Asia its most important distillers grains markets. For Southeast Asia, growth was up 9 percent through July, compared to the same period last year. Specifically, Thailand imported 53 percent more distillers grains and Indonesia wasn’t far behind, up 42 percent. “In Southeast Asia, (distillers grains) is a beachhead export commodity for the United States,” said Adel Yusupov, USGS regional director in Southeast Asia, in an October USGS Global Update newsletter. 

Cordero also mentioned Ireland and Turkey as hot markets. Turkey, which used to import close to half a million metric tons of distillers grains yearly, cut back dramatically due to that country’s restriction against genetically modified organisms (GMO). Still, exports to that country have been increasing again lately, despite GMO restrictions. By the end of July, Turkey had imported more than 223,000 metric tons of U.S. distillers grains, on track to possibly even reach its former export level of 500,000 metric tons again this year. “That’s a big number,” he says. “That’s a bigger number than Canada.”

USGC is also working to increase distillers grains sales in Latin American countries such as Columbia, Costa Rica and Guatemala. For a while, South America was not purchasing U.S. grains, which meant that the opportunities for combination cargo shipments of beans, distillers grains and other grain products to Latin America were decreased. As a result, Latin American countries were buying more coarse grains and soybean meal out of South America and distillers grains sales were down, Cordero explains. Last year, Chili purchased 60 percent less distillers grains, Guatemala 43 percent less, El Salvador 23 percent less and Costa Rica 15 percent less. But, with South America again purchasing more grain from the U.S., there’s opportunity for growth. The USGC has been working hard to remind buyers in Latin American countries about distillers grains and the advantages of the coproduct. “We hope to regain that market and increase our sales,” he says.

Another highlight was USGC’s successful efforts to remove a value-added tax and custom tax on all feed imports, including distillers grains, to Algeria in September 2012. That opened the way for the first purchase of U.S. distillers grains going into the African country a year later, in September 2013. Since then, additional Algerian feed millers have made purchases and USGC expects those to grow into regular purchases. “The Council still sees more opportunities for U.S. corn coproducts like DDGS and (corn gluten feed) in the future as the market continues to develop,” Cary Sifferath, USGS director for the Middle East and Africa, said in an October USGC newsletter.

Author: Holly Jessen
Managing Editor, Ethanol Producer Magazine