Malaysia offers potential growth market for US DDGS

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A need for inexpensive feed ingredients may offer DDGS an increasing market share in Malaysia, says the USDA.

A report on the market potential was released last week by members of the US Department of Agriculture’s (USDA) Foreign Agricultural Service.

Feed ingredients like distiller’s dried grains with solubles (DDGS) could see market growth in Malaysia because ingredients like corn and soybeans have become increasingly expensive, said the market analyst in the USDA report. The price of DDGS is expected to increase sales for use in poultry and livestock rations.

“In Malaysia, US distiller’s dried grains with solubles (DDGS) can play a key role in the diet of chicks, broilers, broiler breeders, laying hens and swine,” said the USDA. “DDGS are the nutrient rich co-product of dry-milled ethanol production made from corn.”

The US Grains Council (USGC) has already been working to grow interest in use of DDGS in both Southeast Asia and specifically in Malaysia, according to Council information.

Consumption in that region is increasing as second tier cities, including Bangkok, Jakarta, Kuala Lumpur and Manila, continue to grow, said Manual Sanchez, assistant director in Southeast Asia for the USGC. “Consumption of food, especially expensive calories, is growing at double digit annual rates throughout the region, with the majority of growth coming from the newly-organized fast food sector,” he added.

“Southeast Asia has undergone an amazing transformation into a rapidly modernizing economic powerhouse,” he told us. “Southeast Asia’s economy can be described by the trend sweeping the region: the rise of middle class consumers and companies chasing their wallets.”

Seeking markets

One reason that the US is seeking new markets or to expand current markets for the feed ingredient is the reduction in purchasing from China.

China opened an anti-dumping and countervailing duty investigation against the US in January 2016. That probe resulted in the imposition of anti-dumping rates of 42.2 to 53.7% and countervailing duty rates of 11.2 to 12%.

The country was the top importer of US DDGS and by 2015, China bought about 51% of US exports for the feed ingredient.

Before the anti-dumping probe, China imported about 538,522 metric tons of DDGS a month and by November 2016, the amount imported dropped 89% to 61,575 metric tons.

 

Market interest

In Malaysia, the Council has looked specifically at getting poultry producers to use the feed ingredient, said Sanchez. The country consumes a large amount of poultry, as it is an affordable protein.

Additionally, poultry consumption does not face some of the same religious restrictions that beef or pork might, he said. “Chicken consumption [is] at an estimated high of 41 kgs per person, per year – fourth in the world per the OECD [Organization for Economic Cooperation and Development].”

The feed ingredient offers a large amount of energy and digestible phosphorus along with a moderate level of protein, which means it can act as an alternative for corn, soybean meal and additive phosphorus, said the USDA.  

Additionally, the relative value of DDGs to corn remains low and the ingredient offers a cost advantage when compared to soybean meal, said Sanchez.

“Compared to soybean meal, FOB ethanol plants DDGS have a $2.29 per protein unit cost advantage this week and a $1.49 advantage FOB NOLA,” he said. “Judged by the relative value of competing feedstuffs, DDGS appear to have a significant upside potential.”

Export details

In 2016, Southeast Asia established itself as the top market globally for the feed ingredient, said Sanchez. It accounted for about 23% of the supply exported out of the US.

Within Malaysia, demand for meat is expected to increase from about 1.4m metric tons in 2010 to about 1.8m metric tons by 2020, he said. A demand expansion also is expected for related livestock products like milk and eggs.

“Given these estimates, we can project DDGS sales climb above 100,000 [metric tons] in 2017, if prices stay at these current levels,” he said.

The feed ingredient first started selling in Malaysia in 2004, said the USDA. From 2015 to 2016, exports have seen a 45.1% increase, growing from about 36,884 tons to 60,206 tons.

However, when looking at the wider role that DDGS could play in Southeast Asia there are some challenges to market expansion, said Sanchez. Shipments of the feed grain continue to be suspended for Vietnam.

“No confirmation has been given for when the market will open back up, however the Council will continue to monitor the situation locally and in Washington,” he said. “Vietnam is a vitally important DDGS importing market for the US industry, and the Council is committed to finding a long-term solution that will allow US DDGS exports to return to this market.”

 

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