DDGS import cap at 500K tonnes offers distillers temporary relief

Capped DDGS imports under the India-US trade deal offer near-term relief to distillers, but larger quotas could pressure oilseed prices, farm incomes and domestic margins

The central government’s clarification that duty concessions on imports of dried distillers’ grains with solubles (DDGS) from the US under an interim trade deal will be capped at 500,000 tonnes in the first phase has eased concerns among domestic distillers and manufacturers, who say the initial volume is unlikely to have a significant impact on them, for now. 

They cautioned, however, that imports beyond this threshold could weigh on their realisations. 

DDGS, a by-product of grain-based ethanol production, along with soybean oil, has emerged as one of the most discussed agricultural items under the interim trade deal. Trade sources said that if the annual tariff-rate quota (TRQ) from the US remains around 500,000 tonnes, the impact would be limited, but a rise to 1.5-2.0 million tonnes (mt) a year would inevitably squeeze margins. 

“Remember one thing, India at present produces around 2.5-3.0 mt of DDGS both from maize and rice, while the potential is to produce almost 4 mt. If the Centre allows 0.5 mt under TRQ, then it would mean that almost 10 per cent of current production would start getting imported,” Ajay Jhunjhunwala, former president of the Solvent Extractors’ Association of India, told Business Standard. 

News agency PTI, however, quoting unnamed government officials, estimated that with domestic animal feed consumption at around 50 mt, a 0.5 mt quota for the US would amount to just 1 per cent of total consumption. 

“The current landed price of US DDGS is around ₹23-25 per kg (assuming a US price of $200 per tonne plus freight of $40-50 per tonne), which is very close to Indian DDGS prices,” another industry participant said. Beyond pricing, industry executives say demand for US-origin DDGS could be stronger because of its lower aflatoxin levels — below 50 parts per billion — compared with 100-300 parts per billion in Indian DDGS. As a result, US supplies would compete with domestic output on both price and quality. 

“My understanding is that once US DDGS starts entering India, port-based distilleries will benefit first, while those in the hinterland will see benefits later,” Jhunjhunwala said, adding that larger players may be better placed to absorb the impact, while smaller distillers could be more vulnerable. 

Much will ultimately depend on the final fine print of the agreement, and until that is known, nothing can be stated with certainty, another person said. 

DDGS, a by-product of ethanol production, has long been blamed for keeping soybean prices under pressure by eroding realisations from soybean meal, which directly competes with DDGS in the poultry feed market. Before stabilising at around ₹45 per kg, soymeal prices in Indian markets had fallen to nearly ₹28-30 per kg in the past few seasons. 

Prices of other oil meals also weakened before staging a partial recovery this season, largely due to DDGS. Rice bran de-oiled cake prices dropped to about ₹11-12 per kg before rebounding to around ₹15-16 per kg, while mustard meal fell to roughly ₹17-18 per kg before recovering to ₹22-23 per kg. 

This trend coincided with India’s rapid expansion of ethanol production from grains such as maize and rice, which led to a sharp rise in DDGS output. 

Another argument raised against US-made DDGS is that it is produced entirely from genetically modified grains, prompting concerns that allowing imports would amount to a backdoor entry of GM crops into India. Experts counter that applying this logic consistently would also require India to avoid importing soybean oil from Argentina, which is produced from GM seeds. 

Beyond the ideological debate over GM crops, the more immediate concern is the economic impact. Data from the past two kharif seasons — 2024-25 and 2025-26 (up to February 6, 2026) — shows that average mandi prices for soybeans in major markets across Madhya  Pradesh, Maharashtra and Rajasthan, which together account for more than 80 per cent of national output, rarely exceeded the government’s minimum support price. 

Soybean prices are closely linked to soymeal rates, as crushing yields about 18 per cent oil with the remainder as meal. Artificially depressed meal prices inevitably drag down overall bean prices. DDGS is currently quoted at around ₹23-24 per kg, compared with soymeal prices of roughly ₹45 per kg, industry sources said. 

While easier access to high-quality DDGS imports could benefit India’s livestock and poultry sectors — as US-made DDGS is considered superior to domestic output — large inflows could hurt not only solvent extractors producing oil meals but also Indian maize- and rice-based distilleries that manufacture DDGS. 

Soybean oil: Good and bad 

In 2024-25, India imported a record 5.47 mt of soybean oil, surpassing the previous high of 4.23 mt recorded in the 2015-16 edible oil year. Of this, about 4.8 mt were imported in crude form, with the rest arriving as refined oil. 

Argentina accounted for the bulk of crude soybean oil shipments at 2.89 mt, followed by Brazil at 1.14 mt and Russia. The US supplied about 0.18 mt, or roughly 4 per cent of total crude soybean oil imports in 2024-25. 

Trade sources said that if sizable volumes of US soybean oil are allowed at zero duty, subject only to an additional 5 per cent agriculture cess, it would weigh on crude soybean oil prices from Argentina, the world’s largest producer, and could also pressure imported palm oil prices.

 

Palm oil is India’s most widely consumed edible oil. Both outcomes would be positive for consumers, as landed prices of palm and soybean oils have risen over the past few years. 

The landed price of crude soybean oil rose by nearly 6 per cent between December 2024 and December 2025, increasing from $1,123 per tonne (CIF, Indian ports) to $1,148 per tonne, after earlier approaching $1,200 per tonne. 

An influx of cheaper US soybean oil could also help keep the landed price of crude palm oil closer to $1,000 per tonne. “But we have to see whether the agriculture cess is also part of the deal,” a senior industry official said. 

The caveat is that US-origin soybean oil is typically $30-40 per tonne more expensive than oil from Argentina or Brazil, in addition to higher shipping costs to India. “Therefore, the duty advantage for an average Indian importer sourcing from the US will be limited,” said B V Mehta, executive director of the Solvent Extractors’ Association of India. 

Traders added that if duty reductions also apply to refined soybean oil from the US, which they argue should be the case, it could help address India’s long-standing issue of unrestricted inflows of refined edible oils from neighbouring Nepal, as such imports may no longer be commercially viable. 

India imported close to 800,000 tonnes of mainly refined soybean and sunflower oil from Nepal at zero duty under the South Asian Free Trade Area agreement between November 2024 and October 2025, among the highest volumes imported from Nepal under the pact. 

The domestic oilseed crushing industry has long argued that large volumes of zero-duty edible oil imports under trade agreements undermine domestic crushing activity and weigh on farmers’ realisations from oilseed cultivation. 

“But if a quota is fixed for imports of soybean oil also from the US, just like DDGS, then the impact will be less,” the official said.