DTN Weekly Distillers Grains Update

Ethanol, Livestock Industries Fear Rumors of Halt in China Imports

OMAHA (DTN) -- The U.S. ethanol and livestock industries are awaiting the next move in a long line of China's attempts to manipulate trade of dried distillers grains. But even if recent rumors are true, many in the industry feel that the reports are merely another attempt by China to control the market, and there has been no immediate reaction in DDG prices.

Reports that China is halting imports of U.S. DDG have been circulating for several weeks. Some news sources reported that Chinese DDG buyers have stopped their purchases, fearing rumors that the government is considering launching another antidumping probe against the U.S.

Melissa George Kessler, director of communications for the U.S. Grains Council, told DTN Wednesday, "We are aware of the reports and are monitoring the situation in D.C. and Beijing along with the team we worked with on the last antidumping case."

China is the largest importer of U.S. DDG and has imported nearly five times more DDG from the U.S. than from any other country. According to statistics from the U.S. Department of Agriculture's Foreign Agricultural Service, China has purchased more than 4.9 million metric tons of U.S. DDG so far in 2015 at a value of nearly $1.3 billion. The next largest importer of U.S. DDG is Mexico, which has purchased about 1 million metric tons at a value of about $232 million. The rest of the top five DDG importers are Vietnam with about 339,051 mt, South Korea with 330,638 mt, and Canada with 304,767 mt.

But while China is a vital market for ethanol producers, trade with that country has been both frustrating and volatile in recent years.

RECENT TRADE HISTORY

Fears of another antidumping probe are well-founded, with memories still fresh from China's antidumping probe announced on Dec. 28, 2010. Four Chinese ethanol producers claim the U.S. allegedly dumped its DDG into Chinese markets cheaper than they could produce it domestically. Chinese importers immediately suspended all purchases of U.S. DDG and the Grains Council coordinated an industry-wide registration process for U.S. companies to respond to the allegations.

While initially the probe did not have a dramatic effect on prices, coming years would bring more trade disruptions with China that had a huge effect on the market.

Most of 2014 was spent in trade disruptions with China, with great volatility in prices as a result. In late 2013, news surfaced that the Chinese government had begun rejecting shipments of U.S. corn after shipments were found to contain the Agrisure Viptera (MIR 162) biotech trait produced by Syngenta Ag. Traders' fears of rejection of DDG shipments soon materialized when DDG shipments were rejected by Chinese authorities right before Christmas and China announced its intentions to test all imports of U.S. DDGS for the presence of MIR 162.

Exports of DDG to China came to an immediate halt, leaving a glut in U.S. supplies that sent prices of DDG plummeting as much as $70 in three days. The continued cease in trade and DDG glut kept prices falling to the lowest levels in nearly two years.

In June 2014, China dropped another bombshell on the industry, announcing it would stop issuing permits for U.S.-produced DDG. This again wreaked havoc on the market and sent DDG prices on an unprecedented downward spiral. Merchandisers reported prices plummeting as much as $45 in one week. In late June, DDG prices reached the lowest level since December 2010 to an average of $125 per ton, a far cry from the high of nearly $300 average reached in July 2012.

In August, yet another announcement shocked the industry, as China demanded that all DDG shipments arriving in Chinese ports be accompanied by an official letter of certification that it contained no trace of MIR 162. Since the U.S. has no such certification and tests for the trait are largely unreliable, the U.S. refused to meet China's demand and DDG trade with China came to a standstill. This caused another nosedive in prices, as spot prices in some markets fell as low as $100 per ton in mid-August and by October fell to a five-year low of just $97 per ton.

By mid-December, rumors that China would approve the MIR 162 trait began to circulate, and on Dec. 22, 2014, after a year or trade disruptions, China announced it had formally granted approval of imports of corn and DDG with the trait. Prices of DDG responded immediately, rising as the announcement prompted trade once again and purchasing began to resume.

In May 2015, reports surfaced that China might be considering restricting imports of DDG, milo and barley, as well as instituting stricter testing for phytosanitary requirements such as pests and pathogens. While the news was not confirmed, the rumors caused prices to DDG to fall slightly in the following days.

Throughout the many trade disruptions, many in the industry believe that China's moves were intended to manipulate the market in order to sell off their huge surplus of domestic corn. The attempts were reported to be especially urgent, as much of China's surplus corn was rumored to be of poor quality.

As a result of all the startling moves by China in recent years, many U.S. traders grew somewhat weary of the dependability of Chinese buyers. While trade with China is vital of the bottom line of many ethanol producers, history has left the industry wondering when the next shoe will drop.

PRICES UNAFFECTED BY RUMORS

Merchandisers told DTN that they have heard the rumors, but have not seen markets react.

Traders at U.S. Commodities told DTN they have heard the same reports, but have not seen any effect on DDG trade in the nearby or out forward.

Other merchandisers commented that China's lowered purchasing has already been priced into the market, so they are not overly concerned unless rejections actually materialize.

Trade with China has already fallen considerably, and with DDG values already low, price levels don't have a lot of room to fall any further, according to Andy Lindsay, territory sales manager at POET Nutrition in Sioux Falls, South Dakota.

"We've already got (China) out of the balance equation," Lindsay said. "We're already roughly 80% the value of corn and it appears we've pretty much bottomed out. For today's market and today's prices, I don't think (DDG prices) are bearish."

In the meantime, good domestic demand has balanced out the lack of export demand and has kept prices from falling further.

Other merchandisers felt the rumors are another ploy by China to manipulate DDG prices. There was some belief that U.S. DDG exporters will not be overly anxious to sell China product until there is confirmation there will not be an anti-dumping lawsuit against the U.S. concerning the country's history.

Many in the industry feel the rumors have not materialized yet, since there has been no effect yet on prices. In fact, while prices traditionally plummet after a move by China, the DTN weekly DDG spot price average actually rose $1 per ton in the past week, From $119 per ton last week to $120 per ton this week.

Some feel that the threats from China stem from the country's anger in recent days over the U.S. conducting more patrols in the South China Sea and China's claims that a U.S. warship illegally entered Chinese territory.

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

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IN THE NEWS

Grains Council: Feed Grains Exports Nearly Topple Record Level

An estimated 100.1 million metric tons of U.S. feed grains were exported in the 2014-2015 market year, the U.S. Grains Council estimated. In an article on the Council website (http://bit.ly/…), that total was the second highest export total on record, and was 800,000 tons higher than the previous year.

The category of U.S. feed grains accounts for all feed grains exported by the U.S. in either unprocessed or value-added form, and includes U.S. corn, sorghum, barley, distiller's dried grains with solubles, corn gluten feed, corn gluten meal, etc.

In the past year, unprocessed feed grain exports comprised less than 15% of all U.S. production, however, unprocessed grains plus the grain equivalents for value-added products such as corn, sorghum, barley, ethanol, meat and poultry, and co-products like DDGS, accounted for 26% of U.S. production.

In the next 10 years, the Council estimates that percentage will increase to about 131 million tons by 2024-2025 and will comprise about 33% of U.S. feed grain production. Such increases will be likely due to an expected rise in foreign demand for U.S. corn, increased demand for U.S. ethanol, and rising U.S. meat and poultry exports by expansion of middle classes in developing countries.

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

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DTN WEEKLY DDG SPOT PRICES

CURRENT PREVIOUS
COMPANY STATE 10/30/2015 10/23/2015 CHANGE
Bartlett and Company, Kansas City, MO (816-753-6300)
Missouri Dry $135 $135 $0
Modified $65 $65 $0
CHS, Minneapolis, MN (800-769-1066)
Illinois Dry $125 $125 $0
Indiana Dry $122 $122 $0
Iowa Dry $118 $115 $3
Michigan Dry $125 $125 $0
Minnesota Dry $110 $105 $5
North Dakota Dry $110 $120 -$10
New York Dry $140 $150 -$10
South Dakota Dry $118 $110 $8
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
Kansas Dry $130 $130 $0
POET Nutrition, Sioux Falls, SD (888-327-8799)
Indiana Dry $120 $115 $5
Iowa Dry $115 $110 $5
Michigan Dry $125 $120 $5
Minnesota Dry $110 $105 $5
Missouri Dry $125 $125 $0
Ohio Dry $125 $120 $5
South Dakota Dry $110 $105 $5
United BioEnergy, Wichita, KS (316-616-3521)
Kansas Dry $125 $125 $0
Wet $50 $50 $0
Illinois Dry $140 $135 $5
Nebraska Dry $125 $125 $0
Wet $50 $50 $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
Illinois Dry $125 $125 $0
Indiana Dry $125 $125 $0
Iowa Dry $115 $115 $0
Michigan Dry $125 $125 $0
Minnesota Dry $111 $112 -$1
Nebraska Dry $115 $120 -$5
New York Dry $145 $145 $0
North Dakota Dry $130 $130 $0
Ohio Dry $125 $125 $0
South Dakota Dry $110 $110 $0
Wisconsin Dry $115 $120 -$5
Valero Energy Corp., San Antonio, TX (402-727-5300)
Indiana Dry $125 $125 $0
Iowa Dry $105 $105 $0
Minnesota Dry $105 $105 $0
Nebraska Dry $120 $115 $5
Ohio Dry $130 $125 $5
South Dakota Dry $105 $105 $0
Western Milling, Goshen, California (559-302-1074)
California Dry $180 $180 $0
*Prices listed per ton.
Weekly Average $120 $119 $1
The weekly average prices above reflect only those companies DTN
collects spot prices from. States include: Missouri, Iowa, Nebraska,
Kansas, Illinois, Minnesota, North Dakota, South Dakota, Michigan,
Wisconsin and Indiana. Prices for Pennsylvania, New York and
California are not included in the averages.

*The spot prices gathered by DTN are only intended to reflect general market trends and may vary. Please contact individual plant or merchandiser for exact prices.

If you would be willing to take a weekly phone call and have your distiller grains spot prices listed in this feature, please contact Cheryl Anderson at (308) 224-1527 or (800) 369-7875, or e-mail cheryl.anderson@dtn.com.

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VALUE OF DDG VS. CORN & SOYBEAN MEAL
Settlement Price: Quote Date Bushel Short Ton
Corn 10/29/2015 $3.8000 $135.71
Soybean Meal 10/29/2015 $301.60
DDG Weekly Average Spot Price $120.00
DDG Value Relative to: 10/23 10/16 10/9
Corn 88.42% 86.50% 83.02%
Soybean Meal 39.79% 36.94% 38.18%
Cost Per Unit of Protein:
DDG $4.80 $4.64 $4.64
Soybean Meal $6.35 $6.61 $6.40
Notes:
Corn and soybean prices taken from DTN Market Quotes. DDG
price represents the average spot price from Midwest
companies collected on Thursday afternoons. Soybean meal
cost per unit of protein is cost per ton divided by 47.5.
DDG cost per unit of protein is cost per ton divided by 25.

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USDA MARKET NEWS/DISTILLER GRAINS PRICES

USDA WEEKLY DISTILLERS GRAINS SUMMARY (Oct 23, 2015)

Dried Modified Wet
FOB PLANT PRICES PER TON
Iowa 95.00-115.00 50.00-65.00 35.00-40.00
Minnesota 100.00-110.00 55.00 32.00-40.00
Nebraska 100.00-122.50 55.00-65.00 40.00-56.00
South Dakota 95.00-110.00 55.00-64.00 35.00-40.00
Wisconsin 110.00-130.00 48.00-65.00 NQ
Eastern Corn Belt 107.00-138.00 55.00-60.00 NQ
Kansas 120.00-145.00 NQ 48.00-60.00
Northern Missouri 120.00-135.00 NQ 40.00-42.00
DELIVERED PRICES PER TON
CIF NOLA 160.00-170.00
Pacific Northwest 168.00-180.00
California 172.00-183.00
Texas Border (metric ton) 190.00-205.00
Lethbridge AB 152.00
Chicago 130.00-140.00

Dried Distillers Grain: 10% Moisture

Modified Wet Distillers: 50-55% Moisture

Wet Distillers Grains: 65-70% Moisture

CALIFORNIA WHOLESALE FEEDSTUFF PRICES (Tue Oct 27, 2015)

Distillers Dry Grains

  Rail to California Points         182.00           up 12.00-1.00
  FOB Truck to California Points    180.00-190.00    dn 3.00-up 7.00

PACIFIC NORTHWEST WEEKLY FEEDSTUFFS (Tue Oct 27, 2015)

Offers for Distillers Dried Grains delivered in October by rail to feed mills in the Pacific Northwest were steady to 1.00 higher from 174.00-180.00. Offers for distillers dried grains trans-loaded onto trucks and delivered to Willamette Valley dairies were steady to 4.00 higher from 192.00-195.00.

*All prices quoted per ton unless otherwise noted.

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NASS/USDA MONTHLY CO-PRODUCTS PRODUCTION

Dry and Wet Mill, Co-products and Products Produced - United States

June 2015 - August 2015

Oct 1, 2015

Highlights:

Dry mill co-product production of distillers dried grains with solubles (DDGS) was 1.94 million tons during August 2015, down 3 percent from July 2015 and down 2 percent from June 2015. Distillers wet grains (DWG) 65 percent or more moisture was 1.15 million tons in August 2015, up 1 percent from July 2015 and up 1 percent from June 2015.

Wet mill corn gluten feed production was 343.5 thousand tons during August 2015, up 3 percent from July 2015 and up 7 percent from June 2015. Wet corn gluten feed 40 to 60 percent moisture was 290.7 thousand tons in August 2015, down 8 percent from July 2015 and down 5 percent from June 2015.

Co-products and Products May 2015 Jun 2015 Jul 2015
Dry Mill tons
Condensed distillers solubles (CDS-syrup) 145,244 149,927 155,218
Corn oil 120,582 125,497 121,810
Distillers dried grains (DDG) 407,259 450,829 452,969
Distillers dried grains with solubles (DDGS) 1,976,508 2,000,851 1,943,205
Modified distillers wet grains (DWG) <65% moisture 1,136,491 1,137,600 1,151,047
Modified distillers wet grains (DWG) 40-64% moisture 367,092 350,460 341,837
Wet Mill
Corn germ meal 63,188 68,528 66,563
Corn gluten feed 321,209 333,828 343,476
Corn gluten meal 92,237 97,130 96,072
Corn oil 51,281 53,364 52,514
Wet corn gluten feed 40-60% moisture 214,995 225,675 217,778

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DDG LINKS/RESOURCES

Organizations

*Distillers Grains Technology Council

http://www.distillersgrains.org

*National Corn Growers Association Corn Distillers Grains Brochure

http://ncga.com/…

*Iowa Corn

http://www.iowacorn.org/…

Nebraska Corn Board

http://www.nebraskacorn.org/…

*Renewable Fuels Association - Ethanol Co-Products

http://www.ethanolrfa.org/…

*American Coalition for Ethanol

http://www.ethanol.org/…

*U.S. Grains Council

http://www.grains.org/…

*South Dakota Corn Utilization Council

http://www.drieddistillersgrains.com

Government Sites

*Iowa Department of Agriculture and Land Stewardship/Office of Renewable Fuels & Coproducts

http://www.distillersgrains.com

University Sites

*University of Minnesota - Distillers Grains By-Products in Livestock

and Poultry Feed

http://www.ddgs.umn.edu

*University of Illinois - Illinois Livestock Integrated Focus Team Distillers Grains site

http://ilift.traill.uiuc.edu/…

*University of Nebraska - Beef Cattle Production By-Product Feeds site

http://beef.unl.edu/…

*University of Nebraska Extension

http://ianrpubs.unl.edu/…

*Iowa Beef Center - Iowa State University

http://www.iowabeefcenter.org/…

*University of Missouri - Byproducts Resource Page

http://agebb.missouri.edu/…

*South Dakota State University - Dairy Science Department - Dairy cattle research

http://dairysci.sdstate.edu/…

(select "Distillers Grains" from the topic menu)

*Purdue University Renewable Energy Web Site

http://www.extension.purdue.edu/…

(select "Biofuels Co-Products from the menu)

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DDG CONFERENCES

If you are sponsoring or know of any event, conference or workshop on distillers grains, and would like to list it in the DTN Weekly Distillers Grains Update, please contact Cheryl Anderson (see contact info below).

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We welcome any comments/suggestions for this feature. Please let us know what information is valuable to you that we could include in the Distillers Grains Weekly Update. Please feel free to contact Cheryl Anderson at (402) 364-2183, or e-mail cheryl.anderson@dtn.com.

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