United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Michael Jewison, mjewison@ers.usda.gov

Fred Gale, fgale@ers.usda.gov

China’s Market for Distillers 

Dried Grains and the Key 

Influences on Its Longer 

Run Potential

FDS-12g-01

August 2012

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction . . . . . . . . . . . . . . . 2

Background: The U.S. DDGS 

Industry and Market . . . . . . . . 3

China: An Important Market 

for U.S. DDGS Exports . . . . . . 4

China’s DDGS Imports Are

Sensitive to Prices . . . . . . . . . . 12

Conclusions . . . . . . . . . . . . . . . 19

References . . . . . . . . . . . . . . . . 21

Abstract

The expansion of corn-based ethanol production in the United States yields a large 

volume of residual co-products called distillers dried grain with solubles (DDGS).

Most DDGS are utilized in the domestic U.S. market, but Chinese importers seeking 

raw materials for animal feed have emerged as a significant export market. High feed 

prices and favorable tax treatment within China stimulated a surge of imports of U.S.

DDGS during 2009-11. China’s potential demand for U.S. DDGS depends on various 

factors that include the price of corn, Chinese policy, and the availability and price of 

other substitute feed ingredients, such as the byproducts of grain processing in China 

(residual products from alcohol production). Demand is robust, but slower growth in 

the U.S. supply of DDGS and uncertainties about Chinese policy may constrain growth 

in exports to China.

Keywords: China, distillers dried grains, corn, exports, feed, ethanol

Acknowledgments

The authors gratefully acknowledge the input and review comments of Lin Hoffman, 

Edward Allen, Maurice Landes, Donna Roberts, and Mark Jekanowski of USDA’s 

Economic Research Service (ERS); Jerry Norton of USDA’s World Agricultural 

Outlook Board; Peter Riley of USDA’s Farm Service Agency; Scott Sindelar, Joshua 

Lagos, Richard Omeara, Oliver Flake, and Alicia Isom of USDA’s Foreign Agricultural 

Service; Jerry Shurson of the University of Minnesota; Robert Wisner of Iowa State 

University; Jacinto Fabiosa of the Food and Agricultural Policy Research Institute; 

and Alvaro Cordero of the U.S. Grains Council. Editorial guidance was provided by 

Priscilla Smith and graphic design by Cynthia A. Ray of ERS.
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The rapid expansion of corn use in U.S. ethanol production is well known.

Less well known, but also critical to the economics of the industry, are 

the supply and demand for the residual co-products from ethanol production, known as distillers dried grains with solubles (DDGS). Robust export 

demand from China for DDGS can simultaneously raise the value to U.S.

ethanol producers and satisfy the Chinese livestock industry’s hunger for 

low-cost feed ingredients.

This report examines the recent trends in U.S.-China trade in DDGS and 

analyzes factors affecting the competitiveness of U.S. DDGS in the Chinese 

market. The report discusses the role of U.S. DDGS in meeting the nutritional needs of Chinese livestock at minimum cost, the scarcity of feed materials in China, trade policy, quality issues, and resistance to imports from 

Chinese suppliers of competing feed ingredients.

Introduction
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DDGS are the primary co-products in the production of ethanol using the drymill process (see box, “What Are DDGS?”). Approximately 31 percent of each 

U.S. bushel of corn used in dry-mill ethanol production is left over as DDGS.

During the 2010/11 corn marketing year (September-August) U.S. corn dry-mill 

ethanol producers used 116.2 million metric tons (mmt) of corn to produce 12.4 

billion gallons of fuel ethanol, resulting in the simultaneous production of 36.3 

mmt of DDGS, which can account for, on average, 20 percent of the typical 

ethanol plant’s total revenue.

1 An additional 0.9 mmt of DDGS were produced by 

U.S. beverage distilleries in 2010/11. Approximately 91.1 percent of corn ethanol 

is produced by dry mills; the remainder is from wet mills. The co-products 

from wet mills include corn gluten feed and corn gluten meal, but not DDGS 

(Hoffman and Baker, 2010).

DDGS have emerged to become a useful feed ingredient and an important 

source of supplementary income for dry-mill ethanol producers. In the United 

States, DDGS are used primarily for dairy and beef feeding. All livestock and 

poultry can use the nutrients from DDGS, but beef and dairy cattle (ruminants) 

can use them more readily than hogs and poultry (monogastrics) (Hoffman and 

Baker, 2011). DDGS are cheaper when incorporated wet (distillers wet grains 

(DWG) contain 65-percent moisture), but higher transport costs and shorter 

shelf life can be problematic. However, DWG actually improve feed quality in 

the beef and dairy sector as a result of most rations having low moisture content.

1One metric ton (mt) of corn produces 106 gallons of ethanol and 0.3125 

mt of DDGS. Assuming cash prices of 

$2.80/gallon for ethanol and $230/mt 

for DDGS, the resulting total revenue 

per mt of corn is (106 X $2.8) + ($230 

X 0.3125) = $368. Therefore, $72/$368 

= 20 percent.

Background: The U.S. DDGS Industry 

and Market

What Are DDGS?

The term “distillers grains” refers to co-products generated by dry-mill 

ethanol plants, including distillers wet grains (DWG), distillers dried grains 

(DDG), distillers wet grains with solubles (DWGS), distillers dried grains 

with solubles (DDGS), and condensed distillers solubles (CDS). Unless 

otherwise specified for the remainder of this report, the term distillers grains 

will mean distillers dried grains with solubles (DDGS).

Distillers dried grains with solubles (DDGS) are the primary residual 

co-product after the starch portion of corn is fermented to produce ethanol.

After the corn has been fermented, alcohol is removed by distillation, 

with the remaining residues then dried. Typically, three types of residual 

co-products are produced via this process: distillers dried grains, distillers 

dried solubles, and distillers dried grains with solubles.

Once the fermented corn is distilled, the soluble portion of the residual 

co-products is condensed by evaporation to make distillers solubles. The 

solid material remaining from the fermentation residues is distillers grains, 

and both co-products are dried to produce distillers dried grains (DDG) 

and distillers dried solubles (DDS), with the former having a higher 

concentration of nutrients than the latter. In the United States, ethanol 

plants blend and dry DDS and DDG to get DDGS. The estimate for U.S.

production is therefore the total of all three products.
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Most DDGS produced in the United States are used domestically in feed 

rations for cattle or other livestock. However, feed manufacturers in other 

countries have shown interest in U.S. DDGS as an economical feed ingredient.

China, in particular, with its rising demand for livestock feed and escalating 

feed costs, has emerged as a significant market. Strong Chinese imports of U.S.

DDGS help feed mills in China meet robust feed demand while simultaneously 

supporting the value of DDGS for the U.S. ethanol industry. Strong markets for 

DDGS are important to the continued profitability of ethanol production, which 

in turn supports the demand for U.S. corn.

Exports have absorbed 19 to 25 percent of the U.S. DDGS supply in recent 

years. U.S. exports of DDGS grew from less than 2.0 mmt in 2006/07 to 

over 8.0 mmt in 2010/11.

2 China was the leading destination of exports 

during 2009/10, with sales reaching 2.2 mmt. Exports to China fell to 1.6 

mmt in 2010/11 due to an increase in U.S. prices and the launch of a Chinese 

antidumping investigation against U.S. DDGS during 2011. Still, during 

2010/11, China was a close second behind Mexico as the top destination for 

U.S. DDGS exports, accounting for 19 percent of the total (fig. 1).

DDGS Potential Role in China’s Feed Industry

China’s demand for DDGS is driven by growth and structural change in its 

livestock sector. China already is one of the leading producers of animal 

protein, with meat output in 2010 totaling 79.3 mmt, including 50.7 mmt of 

pork, 16.0 mmt of poultry meat, 6.5 mmt of beef, and 4.0 mmt of mutton.

2On a September-August basis, the 

marketing year for corn in the United 

States. Data source is U.S. Department 

of Commerce, U.S. Census Bureau. Total trade differences occur between U.S.

Census and China’s Customs Statistics.

China: An Important Market for U.S. DDGS

Exports

Figure 1

U.S. DDGS exports to China surged in 2009/10

Million metric tons

DDGS = Distillers dried grains with solubles.

ROW = Rest of world.

Source: USDA, Economic Research Service analysis of U.S. Customs data.

2008/09 2009/10 2010/11

0

2

4

6

8

10

ROW

Mexico

China
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China also produced 27.6 mmt of eggs, 37.5 mmt of milk, and 53.7 mmt of 

fish, shellfish, and other aquatic products. All of these activities use commercial feed, and all are expected to grow substantially. The country’s 12th 5-year 

plan for the livestock industry anticipates that livestock production will 

continue growing to reach 85.0 mmt of meat, 29.0 mmt of eggs, and 50.0 

mmt of milk by 2015 (table 1). The 5-year plan for fisheries also forecasts 

aggressive growth in the production of aquatic products, reaching 60.0 mmt 

of production over the same period.

3

China’s imported DDGS are purchased mainly by commercial feed 

compounders who combine various ingredients to meet the nutritional needs 

of livestock at minimum cost. Traditionally, Chinese animals and poultry 

were fed household and processing wastes, crop byproducts, vines, tubers 

and forages, but the use of feed grains, oilseed meals, and feed additives has 

increased rapidly since the 1980s. China’s commercial feed production rose 

from under 36.0 mmt in 1991 to 169.0 mmt in 2011 (fig. 2). China’s 5-year 

3China’s aquatic products are raised 

in both fresh and salt water, often using 

commercial feed. The 5-year plan projects the share of farm-raised aquatic 

products to rise from 71 to 75 percent 

during 2010-15.

Table 1

China’s 2011-2015 5-year plan targets for livestock and feed

Item 2010 actual 2015 target Compound annual growth

Million metric tons Percent

Meat 79.3 85.0 1.4

Eggs 27.6 29.0 1.0

Milk 37.5 50.0 5.9

Aquatic products 53.7 60.0 2.2

Feed 162.0 200.0 4.3

Source: China National Bureau of Statistics and 12th 5-Year Plans for Livestock, Fisheries, 

and Feed.

Figure 2

China manufactured feed output, 1990-2015

Million metric tons

Source: USDA, Economic Research Service analysis of data from China Feed Industry Association.

1990 92 94 96 98 2000 02 04 06 08 10

0

50

100

150

200

250

2015

5-year 

plan target
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plan anticipates that commercial feed production will grow to 200.0 mmt in 

2015. The projected annual increase of 4.7 percent (7.6 mmt) is much faster 

than the projected growth in livestock and poultry output. This rapid growth 

reflects a shift from traditional feed sources to commercial feed in China’s 

livestock industry.

As China’s demand for feed expands, the country’s limited endowment of 

land and water resources constrains its capacity to expand feed grain production. Supply is also constrained by China’s tariff and nontariff measures 

restricting corn imports. As demand outpaces supply, domestic prices of 

corn, other grains and oilseed meals are rising (Gale et al., 2012). Feed 

companies and livestock producers are seeking alternative ingredients that 

can reduce feed production costs (Wang, 2011).

Use of imported DDGS in the Chinese feed industry is still in an early stage.

Feed compounders mix a variety of ingredients to produce feed products 

containing needed energy, protein, amino acids, vitamins, and trace elements 

at minimum cost. Corn and soybean meal are the predominant ingredients for 

commercial livestock feed in China, but other major ingredients include wheat 

and rice bran and hulls; other corn processing byproducts; fish meal; cottonseed and rapeseed meals; meat, blood and bone meals; and meat processing 

waste. In 2010, the Ministry of Agriculture estimated that 134 mmt of various 

raw materials were used by the feed industry, with feed use of DDGS estimated at 2.5 mmt (China Ministry of Agriculture Feed Office, 2011).

The rising domestic price of corn has spurred Chinese feed compounders 

to seek alternative raw materials like DDGS that can add energy, protein, B 

vitamins, phosphorus, and trace elements to animal feed formulations at low 

cost. News reports and industry sources indicate that Chinese purchasers view 

DDGS primarily as a substitute for corn (China Feed Trade, 2011; China 

Aquaculture Network, 2010).

4 China has a long tradition of feeding residue 4A U.S. analysis also observed that 

U.S. DDGS are commonly used as a 

substitute for corn (Ferris, 2011).

Figure 3

Livestock sector feed output, 2010

Source: USDA, Economic Research Service analysis of data from China Ministry of Agriculture 

Feed Industry Office, 2011.

Swine 37%

Meat poultry 19%

Egg poultry 29%

Aquaculture 9%

Ruminants 4% Other 2%
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from alcohol distilling to swine, but the practice was traditionally confined to 

farms near distilleries (Coffing et al., 1991). The launch of Chinese grain-based 

ethanol production in 2004 yielded a domestic DDGS supply used mainly in 

northern China. Imports of U.S. DDGS increased as Chinese feed prices began 

rising in recent years, and numerous feed mills in coastal areas began importing 

DDGS (Nongcai Baodian, 2011; China Corn Net, 2011).

DDGS can be included in the diets of a variety of livestock and poultry 

species to varying degrees. In the United States, DDGS are used predominantly for feeding cattle. In China, DDGS use is in an experimental stage and 

is currently in use primarily in feed for poultry and swine (Nongcai Baodian, 

2011). Chinese feed industry statistics show that nearly half of feed manufactured in 2010 was destined for poultry (mainly chickens and ducks) that 

produced either eggs or meat, while 37 percent was fed to swine (see fig.

3).

5 Aquaculture (fish, shrimp, and other shellfish) accounted for 9 percent 

of China’s manufactured feed. Ruminants (mainly cattle, sheep, and goats) 

accounted for only 4 percent of manufactured feed output; these animals 

consume mainly crop residues and forages in China.

The predominance of monogastrics like poultry and hogs in China limits use 

of DDGS since these species cannot easily digest the large amounts of fiber 

in DDGS (Nongcai Baodian, 2011). In China, DDGS generally is limited 

to 10-12 percent of hog feed rations and 5-10 percent of poultry rations, but 

the large number of hogs and poultry in China still represent a large potential market for DDGS. A shift toward large-scale commercial dairy farms 

following China’s 2008 melamine milk-adulteration incident could create 

more demand for U.S. DDGS for Chinese dairy feed (tables 2a and 2b).

Prices and Other Determinants of Competitiveness

Since cost is a major consideration for Chinese buyers, China’s demand 

for imported DDGS depends largely on the price of DDGS and the price of 

substitutes. DDGS are a relatively low-cost feed ingredient compared with 

substitutes such as domestic Chinese corn, soybean meal, distillers grains 

produced in China, and imported corn. From June through December 2011, 

the average price of imported DDGS in China was 1,985 yuan/mt (about 

$310), which was 19 percent lower than the cost of domestic Chinese corn 

and 35 percent lower than soybean meal (fig. 4).

5These totals do not include raw 

grains and other feeds mixed on farms.

Table 2a

Estimated current inclusion rates of DDGS in feed rations 

China United States

Percent

Dairy 20-30 10-20

Beef NA 10-40

Swine 10-12 10-50

Poultry 5-10 5-10

NA = No data available.

Source: U.S. estimates from Hoffman and Baker (2011) and correspondence with Shurson. 

China estimates from Nongcai Baodian (2011).
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The price of U.S. DDGS has historically been related to the price of U.S.

corn, largely because corn is the chief raw material and also because corn 

and DDGS both serve as primary energy sources in animal feeds. An increase 

in the price of U.S. corn usually leads to an increase in the DDGS price.

However, the rapid growth in ethanol production from late 2008 through late 

2010 expanded the supply of U.S. DDGS, contributing to weaker DDGS 

prices relative to corn by the end of this period (fig. 5). By 2011, the DDGS 

price was typically about 80-90 percent of the corn price, with seasonal 

fluctuations in the United States characterized by lower prices during the 

summer months when greater cattle pasture is available, followed by higher 

prices over the winter months when pasture is limited. For the Chinese feed 

Table 2b

Total DDGS consumption by species, crop year 2010/11

China United States

Percent

Dairy 10 30

Beef NA 55

Swine 20 10

Poultry 60 5

Aquaculture 10 NA

Total 100 100

NA = No data available.

Source: U.S. estimates from Hoffman and Baker (2011). China estimates based on reports 

from industry sources.

Figure 4

Average prices of feed ingredients in China, June-December 2011

DDGS = Distillers dried grains with solubles.

*Calculated from average value of commodities reported in China customs statistics plus tariff 

(1 percent on corn, 5 percent on DDGS) and value-added tax (VAT) (13 percent on corn, 0 

percent on DDGS).

**Price in northeast China.

Source: China National Grain and Oils Information Center, unpublished reports, except where 

noted.

Domestic Chinese DDGS**

Imported DDGS*

Domestic Chinese corn

Imported corn*

Rapeseed meal

Cottonseed meal

Peanut meal

Soybean meal

0 500 1,000 1,500 2,000 2,500 3,000 3,500

1,730

1,985

2,030, northeast China

2,405

2,245

2,395

2,875

3,070

2,435, south China

Yuan per metric ton

Feed type
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industry, the decline in U.S. DDGS prices relative to corn made DDGS a 

more attractive alternative to importing U.S. corn.

In addition to the attractive price of U.S. DDGS, importers in Asia are 

attracted by the golden yellow color of U.S. DDGS and their consistency, 

which reflects the uniformity of raw materials and production processes 

used by the U.S. ethanol industry.

6 The color is also indicative of other nutritive content, including ash, fiber, crude fat, and lysine. Research has shown 

that dark-colored DDGS has a lower nutritional value, primarily the result 

of excessive drying (Cromwell et al., 1993; Fastinger et al., 2006). Some 

Chinese feed compounders report that they value the color of U.S. DDGS for 

its influence on the color of the final feed product (Tuan et al., 2008).

Favorable Policy Treatment

Chinese tariff and tax policies play an important role in supporting imports 

of DDGS over other feed ingredients. Imports of DDGS are subject to a relatively low 5-percent tariff, but most importantly are exempt from value added 

taxes (VAT) and are not subject to import quotas (table 3).

Imports of corn—considered a strategic commodity in China—are regulated 

by a tariff rate quota system established when China became a World Trade 

Organization member in 2001. Corn imports within the annual quota of 7.2 

mmt are subject to a tariff of only 1 percent, but 60 percent of the quota is 

reserved for state trading companies.

7 Other companies must go through 

cumbersome procedures to apply for a share of the 2.9 mmt available to nonstate trading companies who are importers.

8 The over-quota tariff rate for 

6This color preference for feed ingredients is not new. During the late 1990s, 

when China previously imported large 

quantities of soybean meal, ERS interviews of Chinese end users indicated 

they disliked the dark color of Brazilian 

soybean meal (Crook et al., 1998). As a 

result, it was blended with U.S. soybean 

meal to improve the overall color.

7These are companies that import on 

behalf of the Government to replenish 

commodity reserves. 8Applicants for quota must meet 

requirements for production capacity 

and have a history of importing corn to 

request a quota allocation from Chinese 

Government authorities each year. China 

had 10,804 feed-processing enterprises 

in 2010 (China Ministry of Agriculture 

Feed Industry Office, 2011).

Dollars per metric ton

Figure 5

Central Illinois corn and DDGS prices 

50

100

150

200

250

300

350

5/5/20069/5/20061/5/20075/5/20079/5/20071/5/20085/5/20089/5/20081/5/20095/5/20099/5/20091/5/20105/5/20109/5/20101/5/20115/5/20119/5/20111/5/20125/5/2012

DDGS

Corn

Note: Prices are on a dry-matter basis, which assumes 10-percent moisture for DDGS and 15-percent moisture for corn. 

DDGS = Distillers dried grains with solubles.

Source: USDA, Agricultural Marketing Service.
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corn is 65 percent ad valorem, and is effectively prohibitive. DDGS imports 

are not subject to an import quota, which simplifies import procedures and 

gives importers more flexibility in making import decisions.

DDGS imports also receive favorable tax treatment. Imported corn and 

soybean meal are assessed a 13-percent VAT on the landed cost of the 

commodities.

9 Chinese regulations exempt most imported feed ingredients 

like DDGS from the VAT, but the exemption for soybean meal was removed 

in 1999 (see box, “Favorable Treatment of Imported Feeds”).

Transport and logistics

The price of DDGS arriving in China is also influenced by ocean and rail 

freight costs. According to industry sources (Guangzhou Renyi, 2010), transportation from the United States to China accounts for approximately 40 

percent of the cost of imported DDGS. These rates can vary from year to year.

For example, during the 2008 financial crisis, freight rates to China plunged.

Most DDGS shipments are priced on a flat free-on-board basis, which gives 

the importer responsibility for freight costs. The trade in U.S. DDGS benefits 

from reduced shipping costs by utilizing the plentiful supply of empty shipping containers returning to China from the United States. While most grain 

exports from the United States are shipped in bulk, about 70 percent of U.S.

DDGS exports to China are shipped in containers, mostly from ports on the 

West Coast or Gulf Coast.

Infrastructure improvements at U.S. ports could facilitate additional DDGS 

shipments to China. A new export facility in Longview, WA, operated by EGT 

Development and opened in February 2012, is expected to reduce the cost of 

bulk shipments to Asian export markets such as China. However, the facility’s 

effect on DDGS trade could be limited since only a few Chinese traders import 

in bulk. Many Chinese importers prefer containerized shipments that facilitate easier separation and handling of relatively small shipments. DDGS can 

at times be difficult to handle and unload because the high fat content makes 

DDGS clump and stick to the sides of containers (Ferris, 2011).

9Greater detail about the definition of 

“landed cost” can be found in the next 

chapter, “China’s DDGS Imports Are 

Sensitive to Prices.”

Table 3

China tariff and value added tax on selected feed ingredients

Item

Value added tax 

(VAT) Tariff Total Import quota

Percent

Corn 13 1 14 Yes

Soybeans 13 3 16 No

Soybean meal 13 5 18 No

DDGS 0 5 5 No

DDGS = Distillers dried grains with solubles.

Source: China Ministry of Finance and China Customs.
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Favorable Treatment of Imported Feeds

Since the 1990s, Chinese authorities have experimented with trade policies 

designed to augment China’s feed supply as a means of facilitating growth 

in the country’s livestock industry. During a period of high feed prices in 

the 1990s, authorities cut tariffs on feeds derived from processing of grains, 

oilseeds, sugar, and alcohol distilling to 5 percent, waived the 13-percent 

value added tax (VAT) on imports of feeds, and eliminated import quotas.

The main purpose of these measures was to increase the supply of soybean 

meal to promote efficient livestock production (Crook et al., 1998). At 

the time, imports of unprocessed soybeans were subject to quotas, a 

3-percent tariff (for shipments within the quota), and a 13-percent VAT.

Soybean oil imports were also subject to a quota, a 13-percent tariff, and 

a 17-percent VAT.

Spurred by the waiver of VAT and removal of quotas, plus a decline in 

world prices, China’s imports of soybean meal surged from negligible 

amounts in 1995 to 3.6 mmt in 1996/97 and 4.2 mmt during 1997/98 (Hsu, 

2001). The surge of imports put downward pressure on domestic Chinese 

soybean meal prices and reduced profit margins of domestic soybeancrushing enterprises. At the same time, large volumes of soybean oil were 

smuggled into China to evade quotas, tariffs, and the VAT (Crook et al., 

1998; Hsu, 2001).

In July 1999, the VAT on imported soybean meal was restored in order 

to slow imports and boost margins for domestic soybean crushers. Since 

2001, regulations have specifically excluded soybean meal from the VAT 

exemption for feeds. Other feeds, including DDGS, still have the VAT 

exemption and a 5-percent tariff.

After the VAT on soybean meal imports was restored, China shifted from 

importing soybean meal and soybean oil to importing mostly unprocessed 

soybeans. Robust investment in soybean processing and removal of quotas 

on imported soybeans further encouraged imports. The volume of imported 

soybeans soared to 54 mmt in 2011. Nearly all of the soybean meal derived 

from imported soybeans is used for animal feed in China. Soybean meal 

imports dropped to 100,000 metric tons (mt) during 2000/01 and rarely 

exceeded 200,000 mt annually in subsequent years.

Similar to the 1990s soybean meal episode, the surge of DDGS imports 

to 3 mmt during 2010 prompted complaints from domestic Chinese 

processors (of ethanol and alcohol) that imports depressed the price of their 

co-products and reduced their profit margins. A group of these companies 

filed a petition with China’s Ministry of Commerce on November 16, 

2010, to launch an antidumping investigation against imports of U.S.

DDGS (discussed in Transports and Logistics section of this chapter).
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Industry sources in China report that cost savings are the main motivation 

behind increased use of imported DDGS in China. A livestock specialist with 

the U.S. Grains Council’s Beijing Office estimated that including DDGS 

could reduce feed costs for Chinese farms by 45 to 75 yuan ($7 to $11) per 

metric ton compared with a corn-soybean meal formulation. The manager of 

a Chinese feed mill asserted that cost savings were the reason for the appeal 

of DDGS (Nongcai Baodian, 2011).

10

A study by Fabiosa et al. (2009) used actual and secondary data to conduct 

a microeconomic analysis on the impact of imported DDGS on feed costs in 

China. Their results indicated a clear economic incentive for feed millers and 

livestock producers to use imported DDGS in their feed rations, with a potential savings of $1 per hundredweight for mixed feed, or 6 percent of average 

feed costs. At the time of the study, China’s DDGS imports from the U.S.

were negligible, but the authors noted the potential for growth was substantial 

given the economic incentives alone.

The substitutability among DDGS, corn, and other feed raw materials from 

both domestic Chinese and imported sources means that China’s imports of 

DDGS and corn are sensitive to relative prices and are variable, depending 

on the ration-formulation methodology used. The rising price of domestic 

corn in China is prompting feed compounders and livestock producers to 

seek out substitutes for corn like U.S. DDGS. In September 2011, China’s 

corn price was approximately 20 percent higher than a year earlier. This rate 

of increase was approximately three times faster than the growth in China’s 

consumer price index (CPI). The prices of other grains and feed resources 

are also rising, and the resulting cost pressures on livestock producers and 

feed mills induce them to search for alternative feeds that can minimize their 

production costs.

The relationship between prices and imports of DDGS and corn is illustrated 

in figure 6, showing China’s monthly imports of DDGS and corn (both 

predominantly from the United States) from 2003 to 2012. The chart also 

displays three prices:

•	 The average price of domestic Chinese corn in Guangzhou, a corn-deficit

region of southern China that typically has among the highest corn prices 

in China.

•	 The estimated landed cost of importing U.S. corn, calculated by adding

monthly ocean-freight rates to the average price of U.S. corn at Gulf of 

Mexico ports plus Chinese tariffs and taxes.

•	 The average cost and freight (C&F) price of imported DDGS arriving

in China, calculated by dividing the monthly value of DDGS imports 

reported in Chinese customs statistics by the volume of imports.

11

China’s imports of both DDGS and corn were insignificant during 2007-

2008 when U.S. corn prices and freight rates were at high levels. During this 

period, China’s corn prices were lower than world prices. During mid-2008, 

10The Beijing Office of the U.S.

Grains Council posts on its website 

periodic reports showing the costs and 

feed value of DDGS and other feed raw 

materials in China (see: http://www.

grains.org.cn/_d269507396.htm).

11Note that customs statistics could 

not be used to calculate the C&F price

of imported corn since China’s corn imports were negligible in most months.

China’s DDGS Imports Are Sensitive 

to Prices
13

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world corn prices and freight rates plunged dramatically. However, China’s 

demand for corn also fell during this period. The Chinese Government 

launched a macroeconomic stimulus program to revive industrial output in 

early 2009 and authorities also purchased domestic corn to support prices.

DDGS and corn imports remained insignificant through the first half of 

2009 even though the cost of imported corn fell to a level below the cost of 

domestic corn.

DDGS imports grew to significant volumes in late 2009 as the Chinese 

economy recovered from a brief slowdown at the end of 2008. By September 

2009, imported corn was still comparable in cost to domestic Chinese corn, 

but the cost of imported DDGS (including the 5-percent tariff) was about 20 

percent less than the average price of Chinese corn and 4 percent less than the 

estimated cost of imported corn (including the 1-percent tariff).

12 A growing 

stream of monthly DDGS imports (nearly all from the United States) began 

to arrive in China in September 2009 and continued into 2010. China’s corn 

imports remained minimal until mid-2010, when the cost of importing corn 

dipped and was comparable to the cost of imported DDGS. This prompted 

a surge of corn imports during June-September. However, that surge was 

choked off by an increase in the cost of imported corn during the second half 

of 2010. During China’s October 2009-September 2010 corn market year 

(2009/10), China’s imports of DDGS totaled 3.1 mmt, and imports of corn 

totaled 1.3 mmt.

China’s DDGS imports remained strong through December 2010, but corn 

imports dropped off as U.S. prices rose and the new Chinese corn harvest 

arrived on the market. The cost of imported DDGS remained about 15 to 25 

percent below the price of Chinese corn, but the cost of imported corn rose 

above the domestic corn price. Consequently, China’s imports of corn were 

12The landed corn price shown in 

figure 6 does not include the VAT. A 

number of large corn sales to China 

appear to have been made to state trading entities, presumably to replenish 

Government reserves. Industry sources 

indicate these imports are exempt 

from VAT, but ERS has not been able 

to confirm this. Other purchases of 

imported corn are subject to VAT.

Dollars per metric ton Million metric tons

Figure 6

China's imports of DDGS and corn are sensitive to relative prices 

0

0.2

0.4

0.6

0.8

1.0

1.2

0

50 

100 

150 

200 

250 

300 

350 

400 

450 

Apr-03Oct-03Apr-04Oct-04Apr-05Oct-05Apr-06Oct-06Apr-07Oct-07Apr-08Oct-08Apr-09Oct-09Apr-10Oct-10Apr-11Oct-11Apr-12

Estimated cost of U.S. corn arriving in China 

China corn

price

DDGS imports

Corn imports

Imported DDGS cost

Source: USDA, Economic Research Service calculations based on data from China’s customs statistics; China National Grains and Oils 

Information Center; USDA.
14

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again minimal during late 2010. Corn imports resumed during the second 

half of 2011 as U.S. prices declined and Chinese prices kept rising.

 The cost of imported DDGS remained well below the cost of Chinese corn 

during the first half of calendar year 2011, but an antidumping investigation against U.S. DDGS announced by China’s Ministry of Commerce 

in December 2010 raised uncertainties for Chinese purchasers (see box, 

“China’s Antidumping Investigation Against U.S. DDGS”). DDGS imports 

resumed their growth during the second half of 2011 as the cost dipped and 

rumors circulated in China that the Government would discontinue the antidumping investigation. During the 2010/11 market year, China’s imports 

of DDGS fell to 2.1 mmt and corn imports fell to 980,000 mt as the cost of 

imported corn rose above domestic prices while imports of rapeseed meal 

from Canada and India increased due to competitive prices.

13 Imports of both 

corn and DDGS were strong during late 2011 and early 2012 as Chinese corn 

prices rose and U.S. prices fell.

13China’s imports of rapeseed 

meal totaled 1.4 mmt during October 

2010-September 2011, up from 1 mmt 

during the year-earlier period.

China’s Antidumping Investigation Against U.S. DDGS

In late December 2010, China’s Ministry of Commerce announced an 

antidumping investigation against imported U.S. DDGS to take place during 

2011. The investigation was requested by a group of domestic Chinese 

alcohol producers that included two of China’s five officially sanctioned 

fuel ethanol companies (Jilin Fuel Ethanol Co. and Anhui Fengyuan 

Biological) and two other alcohol producers in Jilin Province. There may 

have been other companies with an interest in the case, since China has 

dozens of companies producing alcohol products. The petitioners claimed 

that imported DDGS depressed prices of their DDGS and other co-products 

sold in the domestic market, thus reducing their supplementary income 

from alcohol production.

The potential imposition of high countervailing duties as a result of the 

investigation would harm Chinese feed manufacturers and livestock 

producers who use imported DDGS. In his role as a representative to 

the National People’s Congress, the chairman of China’s largest feed 

company publicly opposed the antidumping investigation, saying it was 

not in the interest of the feed industry and only represented the interests of 

a few alcohol producers (“New Hope Asks Chinese Government To Stop 

Antidumping Investigation Against U.S. DDGS,” April 15, 2011; available 

at: http://www.gdfeed.org.cn/news/qiyedongtai/2011/0415/8985.html.) He 

argued that assessing high duties on imported DDGS would raise costs for 

feed companies that would be passed on to consumers in higher meat prices.

On June 21, 2012, the Ministry of Commerce announced the antidumping 

investigation would be terminated, citing a decision by the petitioners to 

withdraw their complaint. Some feed mill managers and analysts speculated 

that the investigation was launched as a strategic measure to slow the rapid 

growth in imported DDGS and prevent their share of the Chinese market 

from exceeding 50 percent (Nongcai Baodian, 2011).
15

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Nonprice Factors Affecting Chinese DDGS Demand

Users may be willing to pay a premium for U.S. DDGS due to its better 

quality and consistency. Industry sources say DDGS produced by Chinese 

ethanol plants are uneven in quality and color due to the variation in raw 

materials and different milling and fermentation processes used (Nongcai 

Baodian, 2011). In most cases, the nutrient quality of China-produced DDGS 

is lower and less consistent than U.S. DDGS, reflecting differences in the 

ethanol production process and excessive drying, which may be the result of 

poor quality feedstock (USDA, Foreign Agricultural Service, 2009).

Mycotoxins in grain are a concern in China’s livestock and feed industry, and 

the concern is even more acute for users of DDGS, particularly for poultry 

and swine, which are more sensitive than ruminants. High moisture levels 

can promote growth of molds and fungi that emit poisonous toxins that can 

weaken livestock and make the animals more vulnerable to disease and slow 

weight gain.

14 Few Chinese farmers have access to grain-drying equipment, 

and grain is frequently stored in facilities where it is vulnerable to moisture 

and temperature changes. When grain is processed into alcohol, the concentration of mycotoxins in DDGS is two to three times higher than the concentration before the starch is removed from the grain (Shurson, 2009). Industry 

sources say mycotoxins are a common problem in domestic Chinese DDGS, 

which requires costly treatment to eliminate (Nongcai Baodian, 2011).

On the other hand, the attraction of DDGS for Chinese buyers could be 

eroded by a “back end” fractionation process being adopted by U.S. ethanol 

producers, which raises revenue by extracting corn oil that can be used for 

biodiesel fuel (Ferris, 2011). Recent data from the U.S. Grains Council (2012) 

showed 90 out of 200 dry-mill ethanol plants in the United States currently 

have oil extraction capability, and the number is expected to increase to 105 

by the summer of 2012. The reduced-oil DDGS produced by this process 

appear to have relatively greater value for cattle than for poultry and swine 

because ruminants can better utilize the higher fiber for energy than can 

monogastric animals (Shurson, 2006).

15 Higher fiber content may discourage 

use for Chinese poultry and swine feed—currently the dominant uses.

At a China feed industry seminar held in 2011, University of Minnesota 

Professor Jerry Shurson explained in a presentation that the new process 

reduces the fat content and a participant in the meeting questioned whether 

the new type of DDGS would be attractive as a feed for China’s poultry and 

swine (Southern Rural News, 2011). So far, the effect of the reduced fat 

content is not clear. The relatively small share of DDGS in final feed products mutes changes in its characteristics, and some research indicates that the 

protein quality—the amino acid balance—of DDGS in general could keep 

even low-oil DDGS attractive to Chinese buyers.

The regional availability of DDGS in China is also important. Domestic 

DDGS and other co-products are mainly produced in the northeastern region, 

where corn supplies are abundant. China’s southern region produces large 

volumes of manufactured feed products but has limited supplies of raw 

materials. Corn and DDGS from northeastern China must be shipped long 

distances at high cost to reach these customers. Guangdong Province has the 

largest commercial feed output in China, but corn prices there are 12 to 15 

14According to one study, tests of 

feed products in China during 2008 

found that nearly all of 342 samples 

were contaminated with mycotoxins, 

and products of corn (DDG, corn gluten 

meal, brewers’ grains) had the highest 

prevalence (Lao, 2009).

15Anticipating this problem for a wide 

spectrum of users who use DDGS as a 

substitute for corn, Ferris (2011, p. 9) 

surmised that “deoiled” DDGS may sell 

at a discounted price for some time after 

adoption of “back end” fractionation.
16

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percent higher than in northeastern provinces. Consequently, southern China 

is the leading destination for imported DDGS. About two-thirds of imports 

arrived at ports in southern China. Districts in Guangdong and neighboring 

Guangxi Province accounted for 1.6 mmt of DDGS imports during 2010 (fig.

7). Shanghai and neighboring districts—also considered part of southern 

China—accounted for 0.5 mmt. The Qingdao District accounted for 1 mmt 

of imports. Qingdao is considered part of northern China, but the district 

includes Shandong Province, the second-leading feed-producing region with 

output nearly matching that of Guangdong in 2010. There were no significant 

DDGS imports by districts in the northeast, a surplus supply region for corn 

where most of China’s domestic DDGS originate.

16

China’s Domestic Production of Alcohol Co-products

China’s antidumping investigation is a reminder that imported DDGS also 

compete with China’s substantial domestic supply of DDGS and related 

residual materials from alcohol distilling. Industry sources speculated that 

the antidumping investigation was launched to prevent imports from gaining 

16China actually exports a small 

volume of DDGS to South Korea and 

Japan, which are geographically close 

to northeast China. However, despite 

the short distance and low cost of 

Chinese DDGS, South Korea and Japan 

import DDGS predominantly from 

the United States. The pattern of these 

bilateral trade flows may be attributable 

in part to the low and uneven quality of 

Chinese DDGS.

Figure 7

China’s imports of DDGS by region, 2011

Note: Map shows volume of imports by customs district. Guangdong includes Huangpu, Guangzhou, Shenzhen, Zhanjiang, Xiamen, and 

Nanning customs districts. Shanghai includes Shanghai, Nanjing, and Ningbo. Shandong includes Qingdao and Tianjin. 

MMT = million metric tons.

DDGS = Distillers dried grains with solubles.

Source: USDA, Economic Research Service calculations based on data from China’s customs statistics; China National Grain and Oils 

Information Center; USDA.
17

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more than 50 percent of China’s DDGS market (Nongcai Baodian, 2011; 

China Corn Net, 2011).

Fuel ethanol is part of a larger alcohol industry that yields various feed 

co-products. During the early 2000s, production of alcohol for beverage, 

fuel, pharmaceutical, and industrial uses expanded rapidly (Gale et al., 2009).

The raw material used for distilling alcohol varies from region to region and 

includes corn, rice, wheat, sorghum, potatoes and other nongrain feed ingredients such as cassava. However, much of the increased capacity was constructed 

in corn-growing regions and uses corn as the primary raw material.

Corn-based co-products from domestic Chinese fuel ethanol and other types 

of alcohol industries are produced mainly in the northeastern region of the 

country, the region with the most abundant corn resources. There is no means 

of directly measuring the availability of residues from alcohol distilling in 

China, but limited statistics on alcohol production show that the industry has 

grown most rapidly in corn-producing regions, suggesting that the alcohol 

industry’s growth represents increased use of corn as the raw material 

(Chinese Academy of Agricultural Mechanization Sciences, 2011).

Co-products from fuel ethanol producers are the closest substitutes for 

imported DDGS. The Chinese Government has officially authorized five 

plants to produce fuel ethanol (see box, “Ethanol Production in China”).

There are no statistics on use of raw materials by these plants. If the four 

grain-based ethanol plants used corn exclusively to produce at capacity (the 

fifth plant uses cassava), they would use roughly 5.5 mmt of corn and have 

co-product residual output of about 1.7 mmt tons (table 4).

17

Although the reported capacity of the five authorized fuel ethanol processors is 1.89 mmt, one article in the Chinese news media reported that fuel 

ethanol production could be even larger than the authorized volume (Zhang, 

2010). This article quoted industry sources claiming that many small alcohol 

distillers reformulate their product to make unauthorized fuel ethanol and the 

17The calculation assumes 3 mt of 

corn yield 1 mt of ethanol and 1 mt of 

DDGS. There are 3.785 liters in 1 gallon and 1,262 liters per mt of ethanol.

Table 4

Officially designated ethanol plants in China, 2010

Company Primary inputs Capacity

Metric tons Gallons

Jilin Fuel Alcohol Company Limited Corn 550,000 183,380,000

Henan Tianguan Group Wheat, Corn, Cassava 500,000 166,710,000

Anhui BBCA Group Wheat and Corn 420,000 140,040,000

Heilongjiang COFCO Corn 220,000 73,350,000

Guangxi COFCO Cassava 200,000 66,680,000

Assuming corn is the only input in Henan and Anhui:

Total corn ethanol production 1,690,000

Total corn used 5,070,000

Total DDGS 1,690,000

DDGS = Distillers dried grains with solubles.

Source: China Petroleum and Chemical Corporation (Sinopec).
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China’s Market for Distillers Dried Grains and the Key Influences on Its Longer Run Potential / FDS-12g-01

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designated producers exceed their authorized volumes when gasoline prices 

are high. The article’s findings could not be confirmed but listings on Chinese 

e-commerce sites checked by ERS include a number of companies listing 

“fuel ethanol” as one of their products. This could also imply a larger supply 

of domestic DDGS than is often acknowledged. Recent Chinese Government 

policy has sought to slow growth of ethanol and other industrial uses of corn 

but production has remained robust.

Ethanol Production in China

China began its ethanol program in 2001 when the Chinese Government 

designated four fuel ethanol producers in Jilin, Heilongjiang, Henan, 

and Anhui Provinces that used corn, rice, and wheat as raw materials. At 

the time, the Government held large reserves of grain and farmers were 

receiving low prices for grain. The four ethanol producers receive cash 

subsidies and tax exemptions and sell their output to two state-owned fuel 

blenders.

In 2006, the Chinese Government announced that new growth in ethanol 

output would come from nongrain raw materials such as cassava, sweet 

sorghum, sweet potatoes, crop residues, and forest products. The nongrain 

raw materials can only be planted on land that is unsuitable for producing 

grain and processing must be nonpolluting. In 2009, a fifth plant began 

producing ethanol in Guangxi Province using cassava as a raw material.

Several ethanol producers conducted experimental trials in producing 

ethanol from sweet sorghum and corn stalks. The feed value of co-products 

from nongrain raw materials is generally low. An Economic Research 

Service team that visited the Guangxi plant was told that the residual by 

product from producing ethanol from cassava can be used as animal feed, 

but it has a lower protein content (11-14 percent) and higher fiber (30-40 

percent). The company burns most of the residual by product for electricity 

generation (Tuan et al., 2008).

China’s 12th 5-year plan for 2011-15 announced a target of producing 

5.0 mmt of biofuels by 2015, with all growth coming from nongrain raw 

materials. In 2011, China’s State Council approved a plan to construct a 

plant in eastern China’s Zhejiang Province that will use cassava imported 

from Southeast Asia as the raw material. Other nongrain ethanol projects 

are planned, and research on new technologies continues.

In 2012, China’s Ministry of Finance sharply reduced the subsidy for 

grain-based ethanol production. The subsidy for 2012 was set at 500 

yuan/mt, less than half the 1276 yuan subsidy in 2011 (the 2012 subsidy 

for nongrain fuel ethanol was set at 750 yuan/mt). The reduction reflects 

concerns among Chinese officials that rising use of corn for industrial 

processing was contributing to upward pressure on corn prices. The shift 

in policy is likely to restrict the domestic supply of DDGS by slowing or 

reducing corn-based ethanol production in China.
19

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China’s robust demand for feed ingredients makes the country an important 

market for U.S. DDGS exports, but the volume of U.S. DDGS exported to 

China in the future is highly uncertain. A key constraint on future growth 

may be prospects for slower expansion in the supply of U.S. DDGS during 

the coming decade, as growth in the volume of corn-based ethanol produced 

is expected to slow. According to the latest USDA baseline projections to 

2021, total U.S. corn used for ethanol is forecast to increase from 128 mmt 

in 2010/11 to 139 mmt in 2021/22, compared with growth of 112 mmt 

between 2000/01 and 2010/11 (USDA/OCE, 2012). This moderation of 

growth reflects slower expected increases in blended gasoline consumption 

in the United States and constraints in the market for ethanol blends above 10 

percent (E10), including approved E15 and E85 blends (USDA/OCE, 2012).

Based on this projected level of ethanol output, U.S. DDGS supplies will 

likely expand, but at a much more subdued rate than in recent years.

It is possible that the volume of U.S. DDGS available for export will decline 

if U.S. domestic use of DDGS increases in the future. DDGS has become 

an important component of U.S. livestock rations, and domestic feed use 

is unlikely to fall substantially from an estimated 29 mmt in 2010/11.

18

The projected increase in U.S. meat consumption and exports over the next 

decade could also result in further increases in domestic demand for DDGS 

(USDA/OCE, 2012). Therefore, it is possible U.S. domestic use of DDGS 

could expand faster than production, but this will depend, in part, on the relative availability and prices for corn and soybean meal.

U.S. DDGS supply constraints aside, relative prices and transportation costs 

will likely have the biggest influence on the destination of U.S. DDGS 

exports in the future. High transportation costs of DDGS and integration of 

feed and livestock sectors in the North American Free Trade Association 

region favor nearby markets—such as Canada and Mexico—over Asian 

markets.

19 On the other hand, high feed prices and robust domestic demand 

in other countries could push DDGS export sales toward other growth destinations in Asia besides China, such as South Korea, Vietnam, and Thailand.

Use of imported DDGS in China is a relatively new phenomenon and limited 

to a few relatively small feed mills in coastal provinces. The cost advantage depends in large part on trends in U.S. and China corn prices including 

tariffs and taxes. If China’s corn prices continue rising, feed mills and livestock producers will face continued pressure to find cheaper feed ingredients 

like DDGS. In the United States, DDGS and corn prices tend to be closely 

related, so a decline in U.S. corn prices relative to Chinese corn prices would 

tend to make both U.S. corn and DDGS more price-competitive in China.

Chinese policy treatment of DDGS is uncertain as officials balance the 

priority of expanding feed supplies against domestic corn-processing 

industry interests. Favorable trade treatment of DDGS is an important factor 

that spurred the import of DDGS. However, the antidumping investigation 

against U.S. DDGS reflects the competing interests of livestock producers 

and domestic suppliers of DDGS (China Corn Net, 2011). DDGS imports 

affect only a relatively small number of alcohol producers in China, but 

18DDGS appears to have substituted 

for direct use of corn and soybean meal 

by livestock producers following the 

expansion of ethanol use of corn. See 

Hoffman and Baker (2011).

19Some have claimed that as transport 

cost becomes a major consideration, it 

will favor importing feed nutrients in 

the form of DDGS rather than corn because the density is magnified by three 

times in the former. Supply constraints 

aside, the substitution of DDGS for 

corn depends on many factors and further research is needed to answer this 

question. Handling advantages for corn 

could partly offset gains from nutrient 

concentration in DDGS.

Conclusions
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industry sources indicate that policymakers and industry members are averse 

to imports gaining a dominant share of any industry (Nongcai Baodian, 

2011).

20 The antidumping investigation was terminated in 2012, suggesting 

that concerns about feed costs prevailed over alcohol industry interests. At 

the same time, Chinese officials have sharply reduced subsidies for domestic 

fuel ethanol and implemented other policies to constrain growth in domestic 

alcohol production that would restrict domestic supplies of DDGS and other 

co-products that compete with imported DDGS.

China’s feed demand is expected to expand rapidly over the next 10 years.

USDA’s baseline projections to 2021 project that feed and residual use of 

corn will expand from 124 mmt to 172 mmt and soybean meal consumption 

will rise from 43 mmt to 73 mmt. This expansion in feed use is driven by a 

livestock sector shifting from backyard to commercial production, which will 

likely utilize more corn and soybean meal and fewer inputs such as household and processing waste, crop by-products, vines, tubers, and other forages.

Feed demand in China will remain robust, but future DDGS sales to China 

depend on the economic value of U.S. supplies compared with alternative 

raw materials including domestic and imported corn. DDGS from the United 

States are one of many sources of raw materials supporting China’s growing 

commercial feed production (imports of DDGS were equivalent to roughly 

2 percent of feed output during 2010). In an environment of rising costs, 

Chinese feed mills will continue to seek out cost-minimizing raw materials. If DDGS sales to China are restricted by rising prices or other factors, 

Chinese demand will shift to other raw materials: corn, wheat, other grains, 

oilseed meals, and other milling and processing co-products. The emergence 

of China’s DDGS imports is a reminder that feed supplies come from diverse 

sources, and demand is price-sensitive.

20The soybean industry is dominated 

by imports, and commentators warn 

that rising imports of DDGS and other 

commodities could lead to a similar 

reliance on imports.
21

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