BEIJING (Reuters) - Brazil signed protocols with China on Tuesday to allow exports of an ethanol by-product used in animal feed, challenging U.S. dominance in the market amid ongoing China-U.S. trade standoff.

The deal, outlined in a Brazilian government document viewed by Reuters, underscores Brazil's push to strengthen agricultural ties with China as President Luiz Inácio Lula da Silva visits the country, and as rising domestic DDG production fuels the search for alternative markets.

Distillers dried grains (DDGs) are highly valued in animal feed, particularly for pigs, cattle, and poultry.

In an interview with Reuters on Monday, the president of Brazil's National Corn Ethanol Union (UNEM) said Brazil and China have been working since 2022 to finalise a sanitary agreement for DDG exports, adding current "broad geopolitical shifts" present a favourable time to conclude the deal.

"It opens up an opportunity for Brazil to become another supplier, another option for China to source animal nutrition products. For us, it means re-establishing and strengthening the relationship between the Brazilian and Chinese markets, which share multiple mutual interests," Guilherme Nolasco added.

In 2024, the U.S. was nearly the sole supplier of DDGs to China, dominating the market with 99.6% of imports by volume, valued at $65.7 million, the Chinese customs data showed.

According to Nolasco, over 10 new plants are under construction and set to begin production within the next two to three years for corn ethanol and DDG, coinciding with the opening of the Chinese market.

Nolasco expects DDG production in Brazil to potentially reach up to 5 million tons in 2025/26.

In April, Agriculture Minister Carlos Fávaro revealed that Brazil is nearing a deal with China to allow DDG exports.

Separately, both countries also signed protocols for the export of poultry and extractive fishery products from Brazil to China, according to the document.