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US DDGS prices rise with China to remove VAT on imported DDGS

Houston — Prices in US Dried Distillers Grains export markets rose Thursday after China's Ministry of Foreign Affairs said the country would remove its value-added tax on imported DDGS.

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"We are pleased to see this move, which we've been working toward for months," said US Grains Council CEO Tom Sleight. "This change will immediately improve the competitiveness of US DDGS in what was once our top market, which is a very positive thing."

Currently, China's VAT on DDGS imports is 11%. The removal of the VAT comes after US President Donald Trump met with Chinese President Xi Jinping.

Sellers lifted their offers for CIF New Orleans DDGS to $160/st Thursday from $151/st Tuesday in response to the move.



Platts' assessment for New Orleans CIF rose to $153/st Thursday from $149/st Tuesday, and for Chicago FOB DDGS rose to $135/st Thursday from $131/st Tuesday.

Although the duty removal was seen as boosting US export prices, buyers were not sure how long the uptick would continue, given no date has been announced for when the duties will be removed, and there are still 42.2-53.7% antidumping duties on US DDGS, a market participant said.

"The China news helps the price, but it's not a game changer," the market participant said.

Other sources said the market had overreacted to the move, but there was support from low inventories for nearby use and strong domestic demand due to cold weather.

Little impact was expected in China's domestic market.

"When and how to implement the exemption are still uncertain, so I do not see any near term effect at the moment," a Chinese buyer said.

China used to be the largest buyer of US DDGS, but in September 2016 imposed a preliminary 33.8% antidumping duty on US DDGS. It then announced a preliminary antisubsidy tariff of 10-10.7%.

China announced its final rule in January, increasing its antidumping duties to 42.2-53.7% and antisubsidy duties to 11.2-12%.

--Sergio Alvarado, sergio.alvarado@spglobal.com

--Xiaojuan Gao, xiaojuan.gao@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com

(UPDATE: Recasts first paragraph, adds details and quotes from sources in Asia)