U.S. distillers’ grain prices rise on domestic demand, China hopes

Chicago | Reuters — The price of corn-based distillers’ dried grain (DDG), a byproduct of ethanol refining, has jumped 25 per cent in the past month as demand rose from domestic livestock feed mixers as well as exporters on hopes China will return to the market after halting imports this summer, traders and analysts said on Friday.

“Protein in the world is tight. Soybean meal is tight, canola meal is tight, cottonseed meal is tight. So people are just moving down the line to the next protein: DDG is a good protein source,” said Ryan McClanahan, a Kansas City-based trader with Commodity Specialists Co., a merchandiser that supplies DDGs to both domestic and export markets.

McClanahan and other traders said DDG exports were also starting to pick up to the wider Pacific Rim, including to Vietnam and South Korea, adding to the fresh inquiries from China importers.

“There’s been export inquiries but no actual sales specifically to China,” said one cash trader of DDGs, who declined to be named.

DDG prices are rebounding from multi-year lows hit after China, the world’s top buyer of feed ingredients, stopped importing in July amid a trade squabble tied to genetically modified U.S. corn.

Chinese authorities said an unapproved GMO corn strain, Syngenta’s MIR 162, had shown up in some U.S. DDG shipments. U.S. export trade groups have been working with China to resolve the issue for months.

“We’re heavily engaged on this daily here in D.C. and in Beijing. But at this time we don’t have any conclusions to report,” U.S. Grains Council spokeswoman Melissa Kessler told Reuters.

Barges of DDG priced for shipment in the first three months of 2015 on the Mississippi River to New Orleans Gulf export terminals rose again on Friday, bid at $195 per ton, up from $183 last week and $157 four weeks ago, traders said (all figures US$).

U.S. soymeal futures also rallied on Friday, responding to the firm DDG cash markets.

The pipeline of protein meals has been thin for months given the slow start to the U.S. soybean harvest that kept soy by-products meager. Then, a recent fire at a major Canadian canola plant increased DDGs demand from West Coast dairies, traders said.

— Christine Stebbins reports for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen and Michael Hirtzer in Chicago.

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