US-Vietnam DDGS deal sees corn exports enjoy silver lining boost

An influx of US corn exports to Vietnam is the by-product of a DDGS deal thrashed out between the two countries in November 2017, and could see Vietnam re-emerge as a regular export destination for US corn.

The country has picked up a number of panamax-sized cargoes in recent weeks for delivery through March and April, according to market sources, with some of the buying driven by US corn being the cheapest origin globally.

But a change to the regulations around fumigation has also enabled US corn to access a market that has not seen regular export flows in recent months, with the country importing around 350,000 mt of corn from Argentina every month, according to market sources.

“The big thing with Vietnam has always been the fumigation method. Vietnam used to require methyl bromide as fumigant,” a US-based broker told Agricensus.

Methyl bromide (MB) is banned in many parts of the world, with the US tending to use phosphine for fumigation.

“We are seeing an increase in the number of enquiries from Vietnam,” one market source said, with a second seeing the buying interest now extending into June – typically when South American harvests should be competing.

Silver lining

The US Grains Council was a key stakeholder in working with Vietnam to solve a problem that originally arose with the suspension of US exports of dried distillers’ grains into the country.

This time, US agriculture seems to have benefited from the unintended consequence of this initiative, with both corn and wheat exports likely to benefit from the work.

“The recent influx of both US corn and wheat into the Vietnamese market was in part a by-product of the original efforts put forward by the Council staff last year,” the US Grains Council’s Southeast Asia director, Manual Sanchez, told Agricensus via email.

As part of the efforts to address the Vietnamese DDGS ban, the Council also worked to remove the MB fumigation directives.

“This cost-prohibitive fumigation policy was put in place by Vietnam’s PPD [Plant Protection Department] at the same time US DDGS were suspended,” Sanchez explained.

While US corn could still be imported into Vietnam, it was subject to additional fumigation costs that that amounted to $5-$10/mt, Sanchez estimated, with the cost typically borne by the buyer.

“We witnessed a dramatic drop in imports during the 8-month period in 2017,” Sanchez said.

As Vietnam demurred on US exports, Argentina has ramped up its efforts with 830,000 mt exported to the country in August 2016, an eight-fold increase on the same month of 2015.

Through 2017, total exports from Argentina into Vietnam amounted to 4.2 million mt, according to data from Argentina’s agriculture ministry – with the US weekly export sales report showing no corn shipments for Vietnam at any time in 2017, and only a handful of wheat references.

However, from the report for the week of December 29-January 4, Vietnam is listed as taking 60,000 mt in corn export sales with a further three listings through to February 8.

These took export sales and optional origin sales to Vietnam to 241,000 mt – with 60,000 mt drawn from the 2018/19 marketing year.

DDGS dispute

The original dispute arose from the discovery of quarantine pests in US DDGS exports which lead to the Vietnamese government introducing a suspension of DDGS imports from October 2016.

As part of that response, the Vietnamese government also imposed new fumigation requirements which hit US corn and wheat imports.

The US Grains Council, along with the US government, worked closely with Vietnamese officials to address concerns, with the Vietnamese officials announcing in September 2017 that it would remove the suspension on DDGS.