India likely to emerge as key DDGS supplier amid ethanol industry expansion

India's dried distillers grains with solubles (DDGS) exports jumped due to rising ethanol demand, positioning the country as a key supplier to Middle East and Asian markets, sources said.

The country's DDGS exports surged to 166,069.97 mt in the financial year 2023-24, up by 132,519.71 mt from the previous year, according to India's Agricultural and Processed Food Products Export Development Authority (APEDA).

DDGS, a byproduct of ethanol produced from corn and rice, is primarily used as a feed alternative to poultry and other animal feed markets, which is slowly replacing soybean and corn as feed due to competitive pricing, according to market participants.

"India's growing economy and middle-class fuel demand for animal protein, primarily poultry and dairy products and consequently the animal feed sector. However, there has been a slowdown in growth in CY 2024 due to high feed prices. Since 2023-24, the growing grain-based ethanol industry has emerged as a significant supplier of DDGS as feed stocks for the animal feed sector," the USDA's latest Grain and Feed Annual for India mentioned.

India's target to achieve a beyond 20% ethanol blend by 2030 has led to the construction of many grain-based plants, pushing DDGS as a key exportable commodity.

"Starting next year, numerous ethanol plants currently under construction will begin operations, positioning India to export DDGS effectively. One of our plants is set to commence operations in the coming months, and we are planning to focus entirely on exporting DDGS, produced from corn," Rajesh Paharia, chief manager business development, Kribhco Agri told Platts.

"India will be well-equipped to supply the Middle Eastern markets and other regions where corn is utilized as feed. India would be able to strategically target logistically favorable and price-sensitive markets. All the issues, such as high moisture content and aflatoxin levels, are adjustable. We are planning to export from Kribhco's Hazira plant to destinations such as Iran."

"100% India is working towards quality improvement in DDGS produced from corn. Geographically, India has an advantage to supply to the Middle East and Far East destinations," a senior trader based in Bangalore said.

They also added that current prices for India DDGS are at $230/mt CFR HCMC.

Where the US is a leading supplier of DDGS, Indian market participants cited that India is unlikely to compete with the US as of now, amid many quality issues that Indian DDGS has to address and improve, such as high aflatoxin levels due to high moisture content in corn.

"The domestic feed market is growing by 4-5%, and now DDGS has replaced soybeans for the feed for poultry because of a cheaper price. We are exporting DDGS but not at a leading global level yet because of higher Aflatoxin levels present currently in DDGS," said a Mumbai-based trader.

The USDA report indicates that India's animal feed demand is expected to grow by 3% in MY 2025-26, while also adding "Industry sources report growing supplies of DDGS from the grain-based ethanol units being supplies to animal feed sector estimated at 3.2 million mt in MY 2024-25 and forecast higher at 4.2 million mt in MY 2025-26."

However, for some market participants, the international demand is overpowering the domestic demand.

"There's more parity in exporting DDGS to countries like Vietnam and Malaysia being the preferred destination for Indian DDGS than selling it in the domestic feed market currently," a Delhi-based supplier said.

India's DDGS export sector is expected to experience significant growth, driven by higher supply due to the country's increasing domestic demand for ethanol production.