CHICAGO, Jan 11 (Reuters) - Exports of U.S. distillers’ dried grains to Thailand have stopped due to new fumigation requirements installed after beetles were discovered in a shipment last year, American traders said on Friday. 

Thai government officials said U.S. shipments required certificates showing they had been “properly fumigated.” Traders said sales had effectively been halted as the two governments negotiate which gas is best for the fumigation. 

Thailand in 2017 was the fourth-biggest overseas market for so-called DDGs, importing 738,413 tonnes of the high-protein feed used at poultry and livestock farms, USDA data showed. 

Osama El-Lissy, a deputy administrator for the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS), said Thailand discovered the Khapra beetle in two container shipments of U.S. DDGs, in August and November. 

Thailand officials from Jan. 1 required all shipments to be fumigated with methyl bromide. However, many U.S. shippers would prefer to use phosphine, El-Lissy said, adding that USDA was sending information to Thailand over the weekend. 

“Right now, I can’t ship,” one U.S. DDGs exporter said, requesting anonymity because he was not authorized to speak with the media. “Trade is shut down.” 

The issue threatened to dent what had been a rare bright spot for U.S. ethanol makers. An oversupply of ethanol has forced many biofuel makers to cut production. China, which formerly was the top importer of both DDGs and ethanol, has largely stopped buying the products due to the Washington-Beijing trade war. 

But relatively robust demand for DDGs elsewhere in Asia and in Mexico has bolstered prices, helping ethanol producers offset losses in the biofuel market. 

Bids for bulk cargoes of DDGs shipped by barge to the U.S. Gulf Coast export market were about $176 per tonne on Thursday, down from $185 per tonne a week ago, according to a U.S. broker. 

Vietnam halted imports of DDGs in 2017 before banning imports after officials there said shipments were contaminated by beetles. That ban was lifted after U.S. and Vietnamese officials agreed on fumigation protocols. 

“It’s one more market we can’t muck up,” another U.S. trader for a ethanol producer and DDGs exporter said of Thailand. (Reporting by Michael Hirtzer; Additional reporting by Panu Wongcha-um and Panarat Thepgumpanat in Bangkok Editing by Susan Thomas)