India-US trade deal: DDGS duty cuts raise concerns, less so for soybean oil

India has agreed to relax or remove duties on several US agri products under an interim trade deal framework, raising risks for domestic producers of DDGS, but providing possible relief on soybean oil

As per the interim framework for a trade deal announced by the Indian and US sides, the former has agreed to eliminate or lower duties on a swathe of agricultural items that include dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products. 

According to official data, though, US agricultural imports to India have been growing at a much faster clip even before the trade deal. In calendar year 2024, the US exported $2.4 billion worth of agricultural products to India while imports from India were valued at over $6.2 billion. 

 

  Of the proposed duty relaxations under the new trade deal, soybean oil and DDGS are of some significance, while clarity is awaited on what other items, particularly apples, are included in the list of fruits that will escape duties.

 

Notwithstanding the current rate of almost 50 per cent duty on apples, India in 2024 imported around 500,000 tonnes of apples, according to government sources.

 

Of this, around 26 per cent, or around 133,447 tonnes, came from Iran, while another 23 per cent, about 116,680 tonnes, came from Turkiye, and 42,716 tonnes, or 8.2 per cent, from Afghanistan. India had lowered additional reciprocal duty on US apples a few years back.

 

Soybean oil attracts around 27.5 per cent duty on all crude forms, and nearly 36 per cent duty on all refined variants.

 

In the 2024-25 edible oil year, data show that India imported close to 4.8 million tonnes (MT) of crude soybean oil, of which the US contributed 0.18 MT, or around 3.7 per cent. The bulk of the soybean oil came from Argentina and Brazil, as well as Russia.

 

Traders that Business Standard spoke to said US soybean oil is typically priced higher than that from Argentina or Brazil, which does not make it an ideal choice for Indian buyers.

 

With the interim framework now in place for the trade deal, the price of US soybean oil might come down once India drops the import duties for crude and refined variants. 

  A bigger concern than soybean oil, however, is the import of dried distillers’ grains with solubles (DDGS), which is a nutrient-rich co-product of dry-milled ethanol production.

 

As per the US Grains Council, US ethanol plants possess the capacity to produce more than 15 billion gallons of ethanol and 44 million metric tonnes (MMT) of DDGS. US data show exports of DDGS have exploded from 5 MT in 2009 to more than 10 MMT across 58 countries in 2022-23.

 

Its southern neighbour Mexico purchased the bulk of DDGS exports, accounting for more than 20 per cent of the export market, while South Korea was the second-largest buyer. Vietnam, Indonesia, and Canada rounded out the top five importers for 2022-23.

 

A massive influx of American DDGS could have a cascading impact on prices of domestically produced DDGS, volumes of which have increased significantly due to the country's large production of grain-based ethanol. As per a note on the US Grains Council website, the Indian market has the potential to import more than 700,000 tonnes of US DDGS annually, but technical barriers exist.

 

Additionally, this could also affect India's soymeal pricing, which has already dropped sharply over the past few years due to its wide replacement by DDGS in animal feed. Soybean rates have also stayed below the minimum support price (MSP) levels for much of the past few years due to DDGS use in animal feed as soybean extraction gives as much as 18 per cent oil and only the balance as meal.  "Though much remains to be seen how cheap imports of US DDGS impacts Indian market as nothing is clear here but if big quantities come then it can impact soymeal rates particularly that used for poultry as animal because US DDGS is normally of a better quality than Indian ones as it free from aflatoxins," a senior industry official said.

 

Other products eligible for duty relaxation, such as nuts and almonds, are mostly high-value items. 

Commerce Ministry Piyush Goyal, in a series of tweets since morning, has clarified that frozen vegetables such as potatoes, peas, beans etc have been denied entry under the trade deal, as have provisionally preserved vegetables such as cucumbers and gherkins, and assorted canned vegetables. 

 

Additionally, no dried vegetables, beans, pulses, roots, tubers from the US have been allowed entry into the Indian markets as part of the deal. However, citrus fruits, oranges, mandarins, and grapefruits will now be allowed, while strawberries remain outside the purview of the deal. 

 

He also said that major crops such as wheat, rice, cereals, wheat flour, and all major dairy products have been kept out of the deal.

 

A few days ago, Union Agriculture Minister Shivraj Singh Chouhan had said that the Indian market has not been opened up for major crops, such as staple grains like millets, staple fruits, or dairy products as part of the India-US trade deal.

 

“So, this deal has been made in the national interest, with the farmers' utmost concern,” Chouhan had said while talking to the media.  “For the agriculture sector, the interim US–India trade pact adopts a calibrated and balanced approach. India will reduce or eliminate tariffs on a limited set of US food and agricultural products and address long-standing non-tariff barriers, while safeguarding Indian farmers. Major crops, food grains, fruits, and dairy products remain protected, and the market has not been opened to genetically modified crops," said Manoj Mishra, partner and Tax Controversy Management leader, Grant Thornton Bharat. "While India continues to export significantly more agricultural products to the US than it imports, US farm exports of tree nuts, cotton and soybean oil to India could grow under the pact. Overall, the agreement supports a stable and balanced agri-trade relationship without putting pressure on Indian farmers,” he added.