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DTN Distillers Grain Weekly Update
Friday, May 22, 2015 7:43AM CDT

By Cheryl Anderson
DTN Staff Reporter

Export markets for dried distillers grains with solubles were down in early 2015, but will likely begin to recover, according to a speaker at the recent Distillers Grains Technology Council's annual distillers grains symposium in Kansas City.

In 2014, the export market for dried distillers grains with solubles took a devastating hit due to China's non-approval and subsequent rejection of shipments of U.S. corn and DDGS containing the MIR 162 biotech trait developed by Syngenta. Alvaro Cordero, manager of global trade for the U.S. Grains Council, said the U.S. DDGS export market is recovering. But even though growth in corn ethanol production is projected to level off due to the Renewable Fuels Standard, Cordero said because ethanol is driving the agricultural industry, he doesn't expect those projections to materialize.

Although January/March DDGS export were down, Cordero said the U.S. exports DDGS to 80 countries and said that the value of DDGS relative to other feedstuff will likely lead to higher inclusion rates in livestock rations and increase export demand.

Randy Ives, director of ethanol services at Gavilon, LLC., said biotech traits are still causing trade disruption, even though China has approved the MIR 162 trait. Other countries such as Turkey and European Union are still in various stages of approving biotech traits from the U.S.

Ives added that future corn and DDGS trade with China is somewhat uncertain, as China has a surplus of corn from last year and may need to use up its own stocks before importing more, even though its domestic corn is priced higher than U.S. corn.

Tim Worledge, editor-in-chief of agriculture for energy news provider Platts, spoke at the symposium about the flow of co-products such as DDGS through U.S. market channels. He shared that in 2012, 23% of DDGS was shipped by rail, while 77% was shipped by trucks and barges.

Ethanol production, RFS blending requirements, ethanol margins and availability of corn for ethanol production will be the biggest drivers of DDGS supplies, Worledge said. The biggest risk to DDGS supplies will be availability of railcars, trucks, barges and vessels; as well as competition from other feedstocks used to make ethanol.

Worledge said that the largest factors in demand for DDGS will be such factors as the level of adoption from buyers, demand from international buyers versus their own local demand, the availability and price of feed substitutes and ease of transport to buyer locations. Risks to DDGS demand include lower regional demand for beef, swine and poultry; as well as import restrictions from international buyers.

Food Safety Modernization Act

Implications of the new Food Safety Modernization Act were also discussed at the DGTC symposium. Richard Sellers, senior vice president of the American Feed Industry association, reviewed the status of the new Food Safety Modernization Act that went into effect in 2012, but will not be enforced until the court-ordered deadline the Food and Drug Administration mandated for the final rule by August 31, 2015.

He reminded those at the symposium that the new law applies to all ingredient processing, feed manufacturing and pet food manufacturing facilities, as well as facilities that deal with feed and ingredient imports and transportation.

The main component of FSMA is the Hazard Analysis and Risk-Based prevention Controls plan that each facility must have.

AFIA has argued that all significant hazards coming into feed mills be controlled by Current Good Manufacturing Practice guidelines, Sellers said. Hazards for DDGS could include: mycotoxins, pesticide residues, physical hazards, industrial contaminants, etc.

He said FDA has tentatively agreed that all hazards on the FDA's list can be controlled by CGMPs and no preventative controls are needed. Although that is still dependent on the final rule, Sellers said AFIA believes this will happen. If approved, AFIA will perform the hazard analysis and make it available to all facilities.

Sellers reminded those present that all food, feed, feed ingredient and pet food facilities that manufacture, process, pack or hold such products must register with FDA in even-numbered- years unless they are a farm. He added that the current definition of "farm" is feed mills that feed their own animals on their own farms, mostly dairies and feedlots.

Matt Frederking, director of regulatory affairs and operations at Ralco Nutrition, warned that facilities should already be working on setting up a HAACP program at their facilities. Preliminary HAACP steps include assembling a team and designating the team coordinator, describing the food and its distribution, describing the ended use and consumers of the food, and developing the verifying a process flow diagram.

New Ethanol Co-Products

The symposium also featured a number of speaker who discussing new fractionated coproducts coming on the market. Such products began with the now-popular reduced-oil DDGS,

Randy Ives, Director of Ethanol Services at Gavilon, LLC., spoke at the symposium and described the trend of removing corn oil from DDGS as the "new normal." Ives said that oil removal capacity is now used in 95% of all DDGS produced and predicted that the future will likely bring even larger percentages of oil removed from DDGS.

Other new co-product streams include high protein DDGS and reduced fiber DDGS. Such innovations have become reality in order to enable ethanol plans to extract more value from the DDGS they produce.

High-protein DDGS bring a higher price than traditional DDGS. Doug Rivers, director of research and development at ICM Inc., said DDGS is about 130% of the value of corn, while high-protein DDGS is about 180%. The company also has new fiber separation technology which is patent pending.

Dr. Jennifer Aurandt, technology development program manager at Valicor, discussed the company's new fractionation technology VFRAC Stillage Optimization Platform that moves the corn oil extraction to the front end of ethanol production. The whole stillage is then divided into three streams: corn oil (1 to 1.2 pounds per bushel) for the biodiesel and poultry feed markets, DDGS for the high fiber feed market, a high protein stream for sow, poultry and fish markets.

Other speakers sharing new products included:

-Greg Jennings, mid-south regional sales manager at Russell Finex Inc., talked about the company's new technology for dewatering spent grains from fermentation that can recover up to 80% of extracted liquids, and is more efficient, is less noisy, needs less maintenance and requires less initial cost.

-Michael Franko, vice president of business development for Fluid Quip Processing Technologies, LLC, spoke about the company's new technology (Still Pro 50), which produces a high purity protein product from whole stillage for such markets as poultry, swine and aquaculture.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com.

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IN THE NEWS

Cheaper DDGS Prices Raise Usage

Demand for dried distillers grains with solubles have declined for third quarter 2015 over first and second quarter levels, according to an article in Ethanol Producer (http://bit.ly/…), written by Sean Broderick, senior merchandiser for CHS in Minneapolis.

The lower prices have resulted in U.S. livestock producers beginning to include more DDGS into their rations.

Higher prices of DDGS had forced some U.S. livestock producers to substitute other ingredients than DDGS. According to DTN's weekly DDGS spot price average and value statistics, the value of DDGS relative to corn has hovered between 120% and 138% since mid-January.

Broderick said that the possible loss of demand from the deaths of more than 34 million birds due to the H5N1 bird flu, may keep DDGS prices from any large upward movement in the near future.

The biggest influence on DDGS prices, Broderick said, is the Chinese market. Currently, DDGS are still priced at a value compared to China's domestic corn. However, another good crop year added to the country's existing surplus of corn could result in China pricing their corn lower in order to move out excess supplies and more seriously competing with U.S. DDGS.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com.

(CZ\SK)


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