Commodities: China's DDGS rules still evolving

July 28, 2014

BY Sean Broderick, CHS

In a parallel to last month, China again has created new rules with regard to shipments and this time there are not a lot of realistic ways to work within the regulatory framework. At the moment, their rules state that all shipments must be accompanied by a government-stamped document stating the absence of MIR 162 corn, or Syngenta’s Agrisure Viptera variety, in that lot.  However, there are not any government agencies which can officially test for this. So until that happens, it looks as though Chinese exports will be substantially slowed.

This has left traders scrambling to find alternative destinations for the product they have bought, both domestically and abroad. In a market that was already flush with trucks due to the lack of railcar movement, this has weighed heavily on prices. The market has dropped $50 to $60 per ton in the last month, and is now below 100 percent the value of local corn. There had been a pretty good book of sales by plants through September, but not as much on for the fourth quarter.  Now, with this Chinese situation happening, with the sheer volume of sales left to made, and in a timeframe that anticipates a huge corn crop, the market is going to feel additional downward pressure.  We have seen reports of the Chinese corn reserves being even larger than originally anticipated, so do not anticipate a quick resolution to their additional regulatory demands. 

In the end, most of the additional sales will need to move domestically, or via containers to other countries.  Prices are already at levels that are increasing inclusion rates in diets for both hogs and poultry, but there is still room for more of that to happen.

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Looking ahead, domestic logistics will take main stage. Rail looks to be in a never-ending quagmire, and winter is not far away. Trucks and truckers will be extremely difficult to find during harvest, and barge freight has had a pretty good pre-harvest run up.  It is going to feel like making sausage: squeezing a lot through a small space.

DDGS pricing: Sept.  2014         Aug.  2014          Sept.  2013

Minnesota      95                160                  225

Chicago         105               185                  255

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Buffalo          130               180                  255

California       163                217                  287

Florida          140                 190                  275

 

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