Opening Doors For U.S. DDGS In Vietnam

Using Market Access Funds (MAP), the Council has been educating Vietnamese feed grain importers and the feed industry in general about how to use Distillers Dried Grains with Solubles (DDGS) from the U.S. ethanol industry for the past 10 years.  The effectiveness of the Council’s promotions programs were highlighted in 2014 as the Vietnamese industry took advantage of a market disruption when the number one import market for U.S. DDGS, China was temporarily closed.  The Vietnamese industry took advantage of a price opportunity and effectively imported double their normal DDGS imports (638 thousand metric tons) valued at $170 million.  In doing so, the Vietnamese industry allowed U.S. exporters to find an alternative market for their DDGS and limiting the market drop in DDGS prices to only 20 percent.  As a result of Council’s engagement, Vietnam imported 280 thousand metric tons (valued at $48 million) more U.S. DDGS than the previous year.  The Council invested $250,000 of MAP funds in support of this Vietnamese promotion program generating a Return on Investment (ROI) of $192 per every $1 of MAP funding invested.

Starting in late 2013, the Chinese government announced a ramp up in inspections for commodity corn imports containing the unapproved biotechnology trait, MIR 162.  In December, the Chinese officials began testing U.S. DDGS shipments for MIR 162.  Known colloquially as the “Christmas Massacre” just the rumor of China checking for MIR 162 was enough to send shockwaves throughout the market.  Within a week, the market had dropped nearly $100/metric ton.  Suddenly, exporters were scrambling to find homes for product that was on the books and traders that went long at the ethanol plants were looking for outlets to offset position risk.

Once China began rejecting DDGS shipments, the Council sprang into action facilitating several thousand tons for U.S. DDGS sales to Vietnam.  The Council also diverted emergency resources to increase its marketing efforts in Vietnam hosting trade teams to the U.S. to ensure that the industry understood the significance of the market opportunity and how they could ramp up their use of this feed product.  In addition, the Council provided technical nutritional support on-the-ground in Vietnam to the feed industry to increase inclusion rates and product sales.

Market diversification is vital for the DDGS exporting industry.  With China importing thirty-eight percent of all U.S. DDGS exports any disruption to this supply chain has a tremendous impact on market price, as we saw in 2014.  The Council has been active in educating importers and end users around the world on how to utilize U.S. DDGS.  Currently over 60 countries import U.S. DDGS.  The Council has been busing promoting DDGS use in the Vietnamese swine and poultry sectors as far back as 2005.  Laying the ground work and building market knowledge that allow an industry to rapidly ramp up its DDGS consumption levels as they did in 2014.  The case of Vietnam highlights how this investment can pay off to prevent a total market meltdown when your number one importer stops importing.