China's Ministry of Commerce opened an antidumping investigation into U.S. exports of a livestock feed that the U.S. farm industry lobby has sought to promote among Chinese feed mills, the latest in a series of trade actions Beijing has started against major trading partners.
The ministry said in a statement Tuesday it plans to look for any evidence of dumping of distillers dried grains, or DDG, from July 2009 to this past June, but may widen the window to see if there was any harm to China's industry starting from 2007.
China also slapped antidumping duties on U.S. chicken this year, accusing the U.S. of subsidizing its poultry industry and hurting China's domestic industry.
U.S. farm interests have viewed DDG, a byproduct created when corn is turned into ethanol, as a big new trade opportunity in China. Imports rose strongly this year as some in China's farm sector chose it over corn as a feedmeal for livestock, in part because it is relatively higher in protein and fiber.
Domestic corn and imported DDG prices are now roughly level, though DDG was cheaper earlier this year. Perhaps more importantly for the industry, DDG imports for use in animal feed aren't subject to China's corn import quotas or its rules on genetically modified food.
China's imports of the commodity have soared this year to around three million metric tons, from around 640,000 tons last year, according to private-sector estimates. This year's imports would be valued at about $650 million at current prices.
Farm goods are some of the U.S.'s biggest exports to China. The U.S. sold $10.58 billion of agricultural products to China in 2009, accounting for about 15% of total exports to the country.
The U.S. farm lobby has promoted DDG world-wide as an animal feed, including on a roadshow to Europe and Asia in recent months. In a November newsletter, the U.S. Grains Council described DDG as a key trade opportunity for the U.S. in China, crucial at a time when China is expanding meat production as consumption shifts to a higher-protein intake.
The Commerce Ministry's investigation will likely be completed by Dec. 28, 2011, but that could be extended to June 28, 2012, under special circumstances, the ministry said. It said the probe covered DDG with added sugars, known as solubles. That product is known as DDGS.
"The government may be focusing on a period when large import volumes were undercutting domestic prices," said Li Dongfa, an analyst with Shanghai JC Intelligence.
Imports in the middle of this year were cheaper by about 300 yuan to 400 yuan ($45 to $60) a ton compared with domestic DDG, Mr. Li estimated.
While prices have since evened, the government may still be moving on the investigation with an eye toward assisting domestic DDG mills, said Xu Wenjie, an analyst with Zheshang Futures.
China's government has long stressed the need to retain self-sufficiency in agriculture. But it has been buying more imports of some grains as rising wealth, changing diets and shrinking farmland alter the domestic market. This year, China broke with years-long convention to become a big new net importer of U.S. corn, importing 1.5 million tons of the grain. China has bought more than $1 billion of corn and corn-related exports from the U.S. this year, a record.