DTN Weekly Distillers Grains Update

China's Policies Top the List of DDG Concerns for 2016

OMAHA (DTN) -- The issue of most concern to the distillers grains industry at present is the recent announcement by China that its Ministry of Commerce has initiated an anti-dumping and countervailing duty investigations of U.S. dried distillers grains with solubles exports to China.

Kurt Rosentrater, executive director and chief executive officer of the Distillers Grains Technology Council, said, "Whether China imports a lot or they import a little, I think China's going to have an influence again this year."

The Chinese Ministry of Commerce notified the U.S. Embassy in Beijing in late December that it would investigate a petition against the U.S. for DDG dumping. Then on Jan. 12, the announcement came that China would indeed initiate the investigation.

China, the largest buyer of U.S. dried distillers grains, has made a habit of making some sort of dramatic announcement regarding DDG trade with the U.S. just before or after Christmas in recent years. This began with its first anti-dumping probe Dec. 28, 2010 when Chinese ethanol producers claimed the U.S. dumped its DDG into Chinese markets cheaper than they could produce it domestically. Then, just before Christmas 2013, China began to reject shipments of U.S. DDGS after shipments were found to contain the Agrisure Viptera (MIR 162) biotech trait produced by Syngenta Ag.

Most of China's moves sent prices of DDG plummeting. After China granted approval of corn and DDG with the MIR 162 trait, trade with China began to resume.

Thomas Sleight, president and chief executive officer of the U.S. Grains Council, said he was disappointed to see the initiation of the investigation and called the allegations by Chinese petitioners "unwarranted and unhelpful."

During the investigation, China's Ministry of Commerce will study whether U.S. agricultural policies in some way create unfair competition. Sleight pointed out there is a list of more than 42 U.S. subsidy programs that China will be investigating to see if they harmed China's local trade.

Sleight added that some of the U.S. ag programs on the list for the investigation do not exist any longer.

The time period for the subsidies in question is from October 1, 2014, to September 30, 2015. The investigation will be completed on January 12, 2017, but could be extended to July 12, 2017, if the government feels it needs more time.

Sleight said that this anti-dumping case will likely not have as much of an impact as last time, as the industry and the council have worked hard to achieve greater market diversification.

"We've been anticipating this. There are alternative markets and we've been working those markets. We're better prepared this time around,' he said.

Rosentrater said, "I think there are a lot of opportunities for importing DDGS into countries other than China. The industry and the U.S. Grains Council have done a great job of promoting our coproducts overseas."

He added that he believes the Middle East may be a potential growth market for U.S. distillers grains.

FOOD SAFETY MODERNIZATION ACT

Another vital issue for the DDG industry in 2016 will be for ethanol companies to comply with new rules under the Food Safety Modernization Act, Rosentrater said.

"The rules are out and companies are hopefully getting their plans together and understanding what is going to be required," he said.

The Food Safety Modernization Act was described by the U.S. Food and Drug Administration as "the most sweeping reform of our food safety laws in more than 70 years." With a lengthy list of new rules and regulations, FSMA has many implications for the feed/grain industries and ethanol producers. This will apply to any domestic or foreign facility which manufactures, processes, packs or stores human food, animal feed or pet food.

The final rule was published in the federal register Sept. 17, 2015 and contains Current Good Manufacturing Practices for all eligible facilities, as well as Preventive Controls for both human food and animal feed. Also, the Foreign Supplier Verification Program rule was issued in October 2015 and the Sanitary Transportation of Food and Feed rule will be issued by March 31, 2016.

The final rule is more than 600 pages long and mandates a wide scope of requirements, including those for employee training and education; maintenance, cleanliness and pest control for facilities; storage of raw materials such as fertilizer and pesticides; holding and distribution, etc.

All eligible facilities must also have "Hazard Analysis and Risk-Based Preventive Controls," including development and implementation of a written animal feed safety plan. That plan must contain a written hazard identification and analysis for all "known or reasonably foreseeable hazards." The new rule details management activities for hazards requiring a preventive control, such as monitoring, time frames for corrective actions, recall plans, etc.

Compliance date for CGMPs and Preventive Controls for small businesses (fewer than 500 full-time employees) are Sept. 18, 2017 for CGMP and Sept. 17, 2018 for Preventive Controls. The compliance dates for very small businesses (generating less than $250,000 for the previous three years) is Sept. 17, 2018 for CGMPs and Sept. 17, 2019 for Preventive Controls. Compliance dates for all other businesses are Sept. 19, 2016 for CGMPs and Sept. 18, 2017 for Preventive Controls.

The U.S. Food and Drug Administration has created the Food Safety Preventive Controls Alliance to develop training courses and technical information to help small and medium-sized companies comply with the new preventive controls rules mandated by FSMA.

The FSPCA consists of government officials, academic and industry representatives that will develop standardized hazard analysis and preventive controls training and education modules, as well as assisting FDA in developing industry-specific guidelines.

FDA provides more information on the FSPCA section of its website at http://1.usa.gov/….

NEW FRACTIONATED DDG PRODUCTS

A continuing trend in 2016 will likely be the new fractionated DDG products/systems, Rosentrater said.

"I think there's a lot of value there in separating or concentrating proteins and fibers, not just oil like we've seen the last couple years," he said. "I think we're really going to see ethanol companies start to take advantage of the true value of these nutrients."

Fractionation began with removal of corn oil from DDG to provide ethanol plants an additional revenue stream. Currently, oil is removed from approximately 95% of all DDG produced in the U.S.

New fractionated co-products, such as high protein DDG and reduced fiber DDG, enable plants to extract more value from the DDG they produce.

For example, high-protein DDG is currently sold at about 130% of the value of corn, while high-protein DDG is sold at about 180% of the value of corn.

Corn oil is used primarily for the biodiesel and poultry feed markets, while high-fiber DDG is sold to high fiber feed markets such as sow, poultry and fish production.

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

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IN THE NEWS

Antimicrobial Use for Ethanol Production Defined in FSMA

Although the Food Safety Modernization Act is complex and will affect ethanol production facilities, guidelines for processing additives and antimicrobials will remain consistent with definitions developed by the U.S. Food and Drug Administration.

According to an article appearing in Ethanol Producer Magazine written by Richard Coulter, senior vice president, scientific and regulatory affairs for Phibro Animal Health (http://bit.ly/…), many ethanol producers have questions about regulatory issues with products they use and their compliance with new FSMA regulations.

Coulter said FDA has spent a number of years prior to the implementation of FSMA to define procedures and guidelines regarding additives. These guidelines state that all additives and antimicrobials used in ethanol production must meet one of three criteria to be used and to be compliant with FSMA. The product must either have a definition in the feed ingredient manual approved by the American Association of Feed Control Officials, must have an approved food additive petition listed in the Federal Registry, or must have been determined to be generally recognized as safe (GRAS) by a panel of experts.

While there has been some confusion in the industry as to potential overlap of the Veterinary Feed Directive guidance on the use of antimicrobials, Coulter said that regulations are very clear that the use of antimicrobials in ethanol production do not require a Veterinary Feed Directive, and that FDA changes to the VFD regulations do not apply to the ethanol industry.

He added that the FDA has been clear that antimicrobials used in the fermentation process for ethanol production are not regulated as animal drugs, but are food additives or components that are considered to be GRAS. Since ethanol coproducts are not medicated feeds, they are not subject to the VFD requirements for use.

Coulter also stated, "Antimicrobials used for ethanol fermentation are not intended to impact distillers grains in any way. They are simply the most effective, safe, and proven infection-management tools available to the industry to control bacteria in fermentation for over 30 years."

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DTN WEEKLY DDG SPOT PRICES

CURRENT PREVIOUS
COMPANY STATE 1/22/2016 1/15/2016 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 $135 $135 $0
Indiana Dry $130 $130 $0
Iowa Dry $120 $120 $0
Michigan Dry $130 $130 $0
Minnesota Dry $115 $115 $0
North Dakota Dry $125 $125 $0
New York Dry $145 $145 $0
South Dakota Dry $120 $120 $0
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
Kansas Dry $135 $135 $0
POET Nutrition, Sioux Falls, SD (888-327-8799)
Indiana Dry $135 $133 $2
Iowa Dry $125 $120 $5
Michigan Dry $132 $132 $0
Minnesota Dry $120 $115 $5
Missouri Dry $138 $135 $3
Ohio Dry $138 $135 $3
South Dakota Dry $120 $120 $0
United BioEnergy, Wichita, KS (316-616-3521)
Kansas Dry $130 $130 $0
Wet $50 $50 $0
Illinois Dry $140 $140 $0
Nebraska Dry $130 $130 $0
Wet $50 $50 $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
Illinois Dry $130 $130 $0
Indiana Dry $127 $127 $0
Iowa Dry $120 $120 $0
Michigan Dry $130 $130 $0
Minnesota Dry $115 $115 $0
Nebraska Dry $130 $130 $0
New York Dry $150 $150 $0
North Dakota Dry $130 $130 $0
Ohio Dry $130 $130 $0
South Dakota Dry $120 $115 $5
Wisconsin Dry $120 $120 $0
Valero Energy Corp., San Antonio, TX (402-727-5300)
Indiana Dry $125 $125 $0
Iowa Dry $120 $120 $0
Minnesota Dry $115 $115 $0
Nebraska Dry $130 $130 $0
Ohio Dry $135 $135 $0
South Dakota Dry $112 $112 $0
Western Milling, Goshen, California (559-302-1074)
California Dry $185 $190 -$5
*Prices listed per ton.
Weekly Average $127 $126 $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 1/21/2016 $3.6700 $131.07
Soybean Meal 1/21/2016 $272.20
DDG Weekly Average Spot Price $127.00
DDG Value Relative to: 1/22 1/15 1/8
Corn 96.89% 98.55% 98.82%
Soybean Meal 46.66% 46.17% 47.03%
Cost Per Unit of Protein:
DDG $5.08 $5.04 $5.04
Soybean Meal $5.73 $5.75 $5.64
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 (Jan. 15, 2016)

Dried Modified Wet
FOB PLANT PRICES PER TON
Iowa 115.00-127.00 50.00-62.00 34.00-40.00
Minnesota 112.00-120.00 58.00 33.00-40.00
Nebraska 130.00-141.00 62.00-75.00 49.00-55.00
South Dakota 115.00-128.00 62.00-67.50 39.00-40.00
Wisconsin 115.00-120.00 50.00-60.00 NQ
Eastern Corn Belt 125.00-140.00 62.00-63.00 NQ
Kansas 140.00-158.00 NQ 50.00-63.00
Northern Missouri 135.00-150.00 NQ 42.00-49.00
DELIVERED PRICES PER TON
CIF NOLA 150.00-162.00
Pacific Northwest 171.00-178.00
California 173.00-178.00
Texas Border (metric ton) 190.00-210.00
Lethbridge AB 152.00
Chicago 135.00-147.00

Dried Distillers Grain: 10% Moisture

Modified Wet Distillers: 50-55% Moisture

Wet Distillers Grains: 65-70% Moisture

CALIFORNIA WHOLESALE FEEDSTUFF PRICES (Tue Jan 19, 2016)

Distillers Dry Grains

  Rail to California Points         170.00-181.00    unch
  FOB Truck to California Points    180.00-198.00    unch-up 11.00

PACIFIC NORTHWEST WEEKLY FEEDSTUFFS (Tue Jan 19, 2016)

Offers for Distillers Dried Grains delivered by rail to feed mills in the Pacific Northwest were 1.00 to 3.00 lower from 177.00-185.00. Offers for distillers dried grains trans-loaded onto trucks and delivered to Willamette Valley dairies were 1.00 to 3.00 lower from 195.00-

200.00.

*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

October 2015 - November 2015

Jan 4, 2016

Highlights:

Dry mill co-product production of distillers dried grains with solubles (DDGS) was 1.94 million tons during November 2015, down 1 percent from October 2015 but up 9 percent from November 2014. Distillers wet grains (DWG) 65 percent or more moisture was 1.13 million tons in November 2015, down 8 percent from October 2015 and down 17 percent from November 2014.

Wet mill corn gluten feed production was 322.7 thousand tons during November 2015, down 1 percent from October 2015 but up 9 percent from November 2014. Wet corn gluten feed 40 to 60 percent moisture was 289.2 thousand tons in November 2015, down 3 percent from October 2015 and down 9 percent from November 2014.

Co-products and Products Nov 2014 Oct 2015 Nov 2015
Dry Mill tons
Condensed distillers solubles (CDS-syrup) 132,236 143,025 124,855
Corn oil 107,190 127,938 130,938
Distillers dried grains (DDG) 419,028 438,027 413,019
Distillers dried grains with solubles (DDGS) 1,770,904 1,953,817 1,935,499
Modified distillers wet grains (DWG) <65% moisture 1,354,729 1,222,032 1,130,071
Modified distillers wet grains (DWG) 40-64% moisture 472,819 386,304 425,499
Wet Mill
Corn germ meal 66,384 62,784 67,645
Corn gluten feed 295,030 326,055 322,741
Corn gluten meal 89,593 83,213 84,505
Corn oil 40,980 48,676 53,597
Wet corn gluten feed 40-60% moisture 317,273 296,954 289,171

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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.

(CZ/AG)