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Chinese DDGS case could disrupt trade: source

CHICAGO (Reuters) - China's recently launched anti-dumping investigation into U.S. distillers' dried grains (DDGS) exports could be disruptive to trade, a U.S. industry trade group said on Thursday.

DDGS, a by-product of ethanol production, have found a ready market in China, where growing demand for meat has fueled a boom in animal feed production.

"China's unusual market and supply volatility over the last two years has resulted in new global trade flows," Thomas Dorr, president and chief executive of the U.S. Grains Council said in a statement. "As trade flows change, it should perhaps not be surprising there would be an adjustment period in response to unprecedented demand."

China has become the world's largest importer of DDGS, buying 2.9 million tonnes between January and November, 542 percent more than in the same months of 2009, according to data from China's General Administration of Customs. Almost all of the supplies were from the United States.

"The United States takes pride in being a reliable supplier of high-quality feed and food grains and its ability to rapidly respond to global market demands," Dorr also said in the statement.

China's Commerce Ministry said earlier this week it would investigate how much damage the alleged dumping of DDGS had caused to China's own industry from January 1, 2007, to June 30, 2010. China produces about 3.5 million tonnes of DDGS per year.

An industry official who promotes U.S. exports said U.S. DDGS prices have been higher than Chinese prices since October. China was still buying because the quality of U.S. DDGS was better, with higher protein and fat content.

(Reporting by Mark Weinraub; Editing by David Gregorio)

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