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July 07, 2014

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GOVERNMENT WATCH 20 THE JOURNAL OF COMMERCE JULY 7.2014 By Mark Szakonyi INCREASING OPPOSITION WITHIN China to genetically modified grains is stunting growth of containerized exports to Asia's largest export market. The first signs of trouble emerged in January, when China rejected some DDGs because they contained an unapproved genetically modified strain. It took the restrictions to another level in June, when it stopped issuing import permits. Although Beijing has called for more imports of GMO products, some factions have whipped up hysteria, saying the grains are part of a Western conspiracy to hurt China's fertility rates. China also has been testing in the mainland for MIR 162, a strain of GMO corn, instead of relying on testing done in the U.S. China's quotas on the feed grain are still in place, but authorities stopped issuing import permits for DDGs last month, said Brian Arnold, a DDG sales manager at DeLong Co., a Clinton, Wis- consin-based transloading company. DDG loadings are down about 30 percent from last year, he said. Shippers' increasing inability to get their DDG loads cleared by China and frustration in not being able to re-export the shipments can be seen in statistics from PIERS, the data division of JOC Group Inc. U.S. container- ized DDG exports in May slipped 0.1 percent year-year-over to 17,084 20-foot equivalent units, according to preliminary PIERS data. Summer is traditionally the busiest time for U.S. DDG exports, Arnold said. "If shippers weren't blacklisted or (if they) resolved their issues (with Chi- nese Customs authorities), they would still be able to use existing import per- mits or use ones from other companies through changes of ownership," he said. The problem goes beyond not getting DDG shipments cleared at the port, said Pam Moses, president and co-founder of Trans Coastal Supply, a Decatur, Illinois- based agriculture exporter. Because China doesn't have a clear system for re-exporting and carriers are reluctant to take the loads, rejected DDG shipments languish at Chi- nese warehouses and ports, racking up demurrage charges. The U.S. Grains Council, a nonprofit organization dedicated to developing export markets for farmers, is working with Chinese authorities and U.S. shippers to iron out dif- ficulties amid changes that seem to occur on the hour, USGC President Tom Sleight said. He stressed that Chinese authorities are still clearing DDG shipments from the U.S. Asked whether the blocking of shipments was a Chinese ploy to lower DDG prices or a bureaucratic snafu, Sleight said, "all of the above." "What we've been trying to have is good discussion with local and national inspection authori- ties," he said. The question isn't whether China will begin allowing more DDGs in the U.S., but when, an executive at a major agriculture shipper said. With its massive population increasingly hungry for protein, China can't afford not to import more DDGs eventually. "The last thing you want in a Communist country is hungry people," he said. A secondary market in China for the DDG exports will emerge as buyers find ways around customs to buy the feed grain at a discount, the executive said. He noted it was strange how China was scrutinizing corn shipments for the MIR 162 strain just as a healthy Midwest crop has pushed the spot market for the commodity down. The majority of corn for animal feed is shipped via breakbulk, while DDGs are increasingly transported by container. DDGs that normally would head to China likely will go to Southeast Asia or be used to feed poul- try and pigs in the U.S. Southeast. JOC Contact Mark Szakonyi at and follow him at CHINA'S GRAIN DRAIN Chinese Customs stops issuing import permits for DDGs, taking limits on genetically modified grain to a new level Source: PIERS, the data division of JOC Group Inc. US EXPORTS OF DDGS TO CHINA n In thousands of TEUs 16 17 18 19 20 May April March Feb. Jan. 2014 -20% 20% 60% 100% 140% ■ Volume ● Year-over-year percent change With its massive population increasingly hungry for protein, China can't afford not to import more DDGs eventually.

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