China Stops Issuing Import Permits for US Distillers Grains

China has stopped issuing permits for imports of distillers dried grains (DDGs) from top exporter the United States on concerns they might contain an unapproved genetically-modified organism (GMO), traders said, sending U.S. prices tumbling.

Quarantine authorities have also asked buyers to re-export earlier shipments that contained MIR 162, a GMO strain developed by Syngenta AG that has not been approved for import by China's agriculture ministry.

Qingdao, China's largest port for DDGs, stopped issuing new permits for shipments last month to any buyers who had still not shipped out any cargoes previously denied entry by quarantine authorities.

"Now it is countrywide. Quarantine authorities stopped issuing import permits last Friday," said one trading manager with a major buyer.

"They asked us to take those rejected shipments away first," said the manager, who declined to be identified as he is not authorized to speak to media.

China is the world's largest buyer of DDGs, a protein-rich byproduct of corn-based ethanol that is used as livestock feed.

Bids for U.S. export barges of the byproduct fell about 10 percent on Monday to $205 per short ton, the lowest since January, U.S. traders said.

DDGs prices already had slipped some 2 percent last week on forecasts for a record domestic corn crop bolstered by favorable conditions. Corn is the main feedstock used in U.S. ethanol production.

Shipments denied entry into China over the presence of the unapproved GMO have until now been stored in bonded warehouses.

Analysts said authorities have required buyers to remove some 250,000 tonnes of U.S. DDGs denied entry due to the presence of MIR 162 and stored at major ports.

Quarantine authorities declined to comment on the matter when reached by telephone.

Chinese importers have been reluctant to re-export those shipments partly because it is hard to find overseas buyers.

China's imports of DDGs hit a record high in April at 613,678 tonnes, a rise of 252 percent from a year ago, with buyers undeterred by government scrutiny since late December, when authorities rejected more than 2,000 tonnes of the grains.

China has also rejected in aggregate since late last year more than 1 million tonnes of U.S. corn due to the presence of MIR 162.

U.S. prices fell by $30 in a week during the initial round of rejections before rebounding as shipments to China recovered their near-record pace.

"We always knew there was another potential shoe to drop," said a U.S. export trader of DDGs.

Expectation of falling imports have supported domestic China rapeseed meal prices, the most-active September 2014 contract rose 2.73 percent to more than one-month high at 3,045 yuan ($490) per tonne.

($1 = 6.2379 Yuan)

(Reporting by Niu Shuping and David Stanway,; additional reporting by Michael Hirtzer in Chicago; Editing by Tom Hogue and Andrew Hay)