How ethanol, DDGS may affect the 2014 US corn crop

Ethanol is no longer in a growth phase. Sure, exports offer strong potential for profitability going forward, but we don’t see new plants being built. We also believe there are too many politics involved for greater use of corn to become realistic, or at least that would matter for the 2014 crop. And, we can’t determine if the ethanol producers even want E15 as it might trigger new plants, increased production and reduced market share for existing plants.
Developments in the DDGS market
In the meantime, there is a development worth watching that is slightly more negative than positive for corn prices. As the ethanol industry starts to make ethanol from this corn crop, dried distillers grains with solubles (DDGS) supplies might weigh on the corn market because the trade dilemma with China was never resolved last summer.
In the U.S., in 2013 and 2014 there has been less DDGS consumed by all livestock after the drought of 2012 and $8 corn, because corn is trending lower and is cheaper. We anticipate this trend to continue in 2015 as the high-quality crop being harvested should make better feed than the inclusion of DDGS. Some livestock operations that are regionally close to an ethanol plant and therefore have transportation advantages will still use DDGS.
We expect domestic livestock to shift to a more traditional feed ration: More corn, soybean meal and less DDGS. If we are correct, then a greater need for DDGS to be exported opens up, and history shows us that China can account for 50 percent of DDGS exports.
DDGS exports are a delicate matter when applying the overall balance of fundamental factors applied to the price of corn. In other words, farmers and ethanol producers really need this issue to be resolved so we can ship/export DDGS to China. DDGS is not exactly a perishable commodity, but it is a commodity that requires constant movement of product. The worst case scenario would be a backup of DDGS with nowhere to go. Mexico will most likely have the opportunity to step up its use of this feed commodity, but for a price-neutral balance to occur, we need China to remain a stable and consistent DDGS buyer.
Backing up a supply of any product or commodity is never a good thing, and the readers of nearly all of the WATT publications have likely experienced that in their careers.

China denies US dried distillers grains shipments

China has denied about 2,000 metric tons of U.S. dried distillers grains (DDG), and more rejections are expected in coming weeks as Beijing imposes strict checks over an unapproved genetically-modified (GMO) strain, traders said on December 26, 2013.
According to a Reuters report, the move follows the rejection of more than a half-million metric tons of U.S. corn when authorities detected the presence of MIR 162, a GMO variety developed by Syngenta AG but not approved for import by China's agriculture ministry.
"The containers, which were sealed for a while, have been rejected at a port in Shanghai," said one trader with a domestic trading house.
Quarantine authorities in Shanghai declined immediate comment.
According to the report, more rejections were likely after the General Administration of Quality Supervision, Inspection and Quarantine (CIQ) issued a notice to local authorities asking them to step up checks for MIR 162 in DDG cargoes.
"Quarantine authorities at major ports have been notified and will be strict in testing," said another trader, with a major state-owned trading house. "Before, authorities were just checking on selective shipments, but now all shipments will have to be tested and a large volume may be turned away."
The U.S. has urged China to act promptly to approve the strain.

Korea DDGS imports up over 100 percent on use in swine feed

Korean imports of U.S. distiller's dried grains with solubles (DDGS) have increased more than 100 percent with continued growth potential as Korean nutritionists gain confidence in utilizing DDGS in swine rations. The U.S. Grains Council hosted a webinar the week of November 3 aimed at feed formulators, swine extension specialists and pork producers, giving the council a longer reach into the Korean swine industry and enabling local partners to share information more broadly among industry colleagues.
As a primary driver of feed grain consumption in Korea, the swine sector is always in pursuit for new hog feeding and management tips. This program enabled participants to review important swine management practices, including the topic of DDGS feeding value in swine rations. Very low levels of DDGS are currently incorporated in Korean swine rations due mainly to the lack of experience with DDGS, even though feed millers and farmers are familiar with and appreciate the product. When the swine sector, and other livestock and poultry sectors, begin using DDGS at recommended levels, a substantial increase in importation of U.S. DDGS up to 1.5 million metric tons per year will occur.
"This webinar was a great experience for Korean swine producers," said Byong Ryol Min, USGC director in Korea. "They were able to learn from a prominent U.S. swine expert, Mike Tokach, extension specialists and swine nutritionist of Kansas State University, ways to increase production efficiency, including through grain formulation that includes DDGS."

US DDGS exports up in Southeast Asia

U.S. distiller's dried grains with solubles (DDGS) exports were up 6 percent through the first half of calendar year 2013, according to reports. Southeast Asia saw especially strong export growth, up 9 percent, with major gains in Thailand (up 53 percent) and Indonesia (up 42 percent) more than offsetting declines in Malaysia and the Philippines. Overall, U.S. exports to the region were up 605,000 metric tons.
"In Southeast Asia, DDGS are a beachhead export commodity for the United States," said Adel Yusupov, U.S. Grains Council regional director in Southeast Asia. "While India and South America are our major regional competitors in coarse grains, DDGS is a key product where the United States commands a significant advantage due to its unique mix of quality feed protein and energy benefits for poultry and swine. Southeast Asia's commercial feed production, currently at 60 million metric tons, is about one-third of China's and growing at 5-8 percent per year, driven by consumers' preference for higher value calories. We are working to tap into these markets and build demand for DDGS across all animal sectors."

Low oil DDGS value in poultry rations needs to be re-evaluated

Low oil DDGS products can hold a place in poultry rations, but it will have less value as oil is taken out, said Dr. Sally Noll, University of Minnesota, and Dr. Sheila E. Purdum, University of Nebraska, during the pre-show Nutrition and Poultry Health Symposium at the 2013 Midwest Poultry Federation Convention.
Over the past five years, DDGS have become a mainstay in poultry rations, increasing to as much as 10 percent of many diets. The oil content has presented a highly available source of energy for poultry. However, as ethanol plants are extracting oil from DDGS for other purposes, the value of DDGS energy needs to be re-evaluated, according to Noll and Purdum.
Noll presented study results on the impact of feeding DDGS that vary in fat content through de-oiling on finishing market turkey performance, especially feed conversion. Purdum presented research conducted in laying hens that looked at the effects of low oil DDGS, incorporated at 20 percent of the ration, on feed intake and egg production.
In summary, other sources of energy will need to increase in the rations at economic prices to provide the energy needs of the bird. Low oil DDGS products are more likely to fit in layer rations, which are lower in metabolizable energy compared to meat bird rations such as broilers or turkeys. Research shows that most laying hen rations likely have enough flex in their metabolizable energy formulation to allow for 4-6 kcal/kg drops in energy, with hens adjusting feed intake slightly up.
Producers of low oil DDGS should not expect as high of economic value associated with low oil products compared to higher oil products in the poultry feed industry, said Noll and Purdum.

DDGS supply could tighten as ethanol industry adjusts

A potential decline in ethanol production could impact the animal feed industry in 2013 in more ways than just freeing up an already tight corn supply.
According toTim Brusnahan, it could also affect the amount of Distillers Dried Grain and Solubles. Brusnahan, Brock Associates, shared his insights during the 2013 Feed Grains, Wheat and Oilseeds Commodity Outlook webinar, hosted by WATTAgNet on January 22 (watch the webinar on demand).
“The U.S. consumer of gasoline has made an adjustment, going back to 2008 when gasoline touched $4 a gallon. Since that time, we’ve used less gas,” said Brusnahan. “The bottom line is gasoline use is less, thus decreasing the ethanol blend demand.”
He adds that since there is also a short supply of corn available, “economics will prevail,” and regardless of whether the government ethanol mandate is modified, less ethanol will be produced this year. He added there are 20 plants sitting idle, and others could possibly run under capacity or with an early season slowdown. That slowdown of ethanol production can signal a smaller supply of DDGS, which are a co-product of the ethanol-making process.
“This is an issue I suggest you take a pretty close look at. DDGS supplies will tighten up at some point,” he said.
Brusnahan also discussed animal feed buying strategies. While he said that not all feed buying strategies fit everyone’s needs, he has a set of guidelines that could be considered regardless of the operation.
One thing that should be universal for animal feed buyers, he said, is having 60 days of ownership amid the tight supply market. When the supplies are as tight as they are now, the futures and options contract doesn’t always work effectively, he said, because of the tight supply and logistical challenges.
He also advises keeping an eye on wheat futures, as they will play a major role this year. When wheat futures move into a supply-driven rally, Brusnahan said corn will probably be not far behind. And if drought conditions extend into late April, it could ignite another supply driven rally for wheat that can influence the price of corn.
Brusnahan also touched on how the amount of available corn has prompted a shift in the commodities used for animal feed. While corn usage has dropped 2.2 percent in 2013, other grains gained part of the share. Wheat saw the biggest growth, going up 113.4 percent, while milo use went up 76.1 percent. Barley went up 57.9 percent, and even soybeans saw growth, as usage went up 9.8 percent.
Brusnahan said that the outlook for the animal feed industry is good, and livestock and poultry producers’ good management is a key factor in that. He notes that though cattle production is down, the pork industry has done well financially and the broiler industry has also admirably sustained itself amid tough times. Other minor livestock industries have also met the challenges well, he said.
“This is the reason why feed use is as strong as it is. Everyone has managed themselves well,” he said. Growers found the right time to purchase feed, which enabled them to keep producing and move their products to the consumers."
Other topics covered during the webinar included financial factors in the animal feed market for 2013, market fundamentals for the United States and South America, and a 2013 crop outlook.


Brock Associates and Brusnahan provide commodity price forecasting, research analysis, hedging and marketing strategies for farm producers and dairy producers and procurement and risk management strategies for feed manufacturers and corn processors.

Study determines energy available to broilers from corn distillers grains

Researchers at Purdue University have determined the amount of metabolizable energy available to young broiler chickens from dried corn distillers grains, DDG, and dried corn distillers grains with solubles, DDGS.
Currently, more than 35 percent of the annual U.S. corn crop is being used for ethanol production, resulting in less and more expensive corn for use in diets for poultry and other livestock. As a result, poultry growers have turned to DDG and, more often, DDGS, both byproducts of the ethanol production process, to provide an economically affordable substitute. The challenge, say researchers, has been to accurately determine the energy content of these fermentation byproducts.
“The energy and nutrients of different components of the feed are extracted at different parts of the bird’s digestive tract, and not all of the energy in the feed is actually available to the bird," said Dr. Layi Adeola, the final article’s lead author and a professor in Purdue’s Department of Animal Sciences. "For example, when feed moves from the ileum to the cecum and large intestine, microbes in the gut will extract a significant portion of the nutrients for their own energy needs. It turns out that the most accurate measure of the energy in DDG and DDGS available to the bird is the 'ileal digestible energy' or IDE, most of which can be utilized by the animal. Hence, determining the IDE value was the focus of our research.”
The DDG and DDGS were incorporated into a corn-soybean meal-based reference diet at three levels (0, 300 or 600 g/kg) by replacing the energy-yielding ingredients. The five diets were fed to 120 male Ross 308 broilers.

Some pigs may feed more efficiently, says study

Results of a preliminary experiment conducted at the University of Illinois indicate that it may be possible to select pigs that can make efficient use of energy in less expensive feed ingredients, thus reducing diet costs.
Less expensive feed is usually higher in fiber than the corn-soy diets typically used in U.S. swine production, according to Hans H. Stein, professor of animal sciences at the University of Illinois at Urbana-Champaign. However, the white breeds that are used in commercial pork production use only about 40 percent of the insoluble fiber. "If you can increase that number to 50 or 60 or 70 percent, then of course, you would get a much better use of the energy in those ingredients," said Stein. "There are also indigenous breeds of pigs that have not been selected for commercial production, and these breeds have, therefore, not been fed the corn-soybean meal diets for as many generations as the white breeds."
The study focused specifically on Chinese Meishan pigs, on the theory that they would use fiber more efficiently than the typical white breeds. "What we observed was that, particularly for the DDGS diets, the Meishans were quite a bit more effective at using that fiber," said Stein. "That diet is high in insoluble dietary fiber. When we looked at more soluble fibers, there was no difference." Although Meishan pigs would never be used for commercial pork production in the U.S., the results indicate that differences exist among breeds of pigs. Thus, it is possible that differences also exist among the white breeds and that some may use fibers more efficiently than others, according to the researchers.
Stein said that the findings are preliminary, and determining if white breeds can be bred to use insoluble fiber more efficiently will be expensive because it requires selecting pigs for multiple generations. The next step is pursuing funding for further research.

China reduced ethanol growth means increased distiller's grain imports

China's five-year plan to reduce its domestic production of grain-based ethanol will result in tighter supplies of dried distiller's grain for animal feed and an increased demand for imports of the byproduct through 2016, according to the U.S. Grains Council. Imports of dried distiller's grains from the U.S. to China may rise to 6 million metric tons in the next four years, almost double the 3.1 million metric tons imported in the 2009-2010 marketing year. Imported U.S. feed will make up 42 percent of China's consumption, according to Shanghai JC Intelligence Co. 

China extends anti-dumping probe on US distillers' grains imports

China's Commerce Ministry has said that it will extend an anti-dumping probe on imports of U.S. distillers' dried grains until June 28, 2012, before making a final ruling, according to reports. The extension is due to the case being "special and complicated," said the Ministry. The anti-dumping investigation was launched in December 2010, causing DDG imports in the first 11 months of 2011 to fall by 48% to 1.5 million metric tons. 2010 imports from the U.S. had previously grown 385% to 3.16 million metric tons, worth more than $753 million.

Distillers' grains substituting for more corn, soybeans in feed

On average, between crop years 2006/2007 and 2010/2011, 1 metric ton of distillers' grains (DDGS) produced for animal feed by U.S. ethanol plants substituted for about 1.22 metric tons of corn and soybean meal combined, according to a report by the U.S. Department of Agriculture.
These findings may result in a net increase in DDGS in animal feed, as over time the amount in beef cattle feed declines but the share in dairy cattle, swine and poultry feed increases, according to the report. "As the market share for beef cattle declined, market shares for dairy cattle, swine and poultry increased," said the report. "Beef cattle’s DDGS substitution rate for corn is higher than any other type of livestock/poultry but is the lowest for soybean meal. Changes in aggregate substitution rates are expected to slow as annual market shares by type of livestock/poultry stabilize."
Corn and soybean meal quantities fed in the U.S. have moderated or declined in recent years, due partly to the substitution of DDGS or other ethanol coproducts (corn gluten feed or corn gluten meal) for corn and/or soybean meal. As of the 2010/2011 crop year, DDGS replaced soybean meal as the number two feedstuff fed, and is second only to corn, according to the USDA.
While ethanol expansion raised the demand for corn, DDGS from the dry-mill production process partially offsets the impact on the feed market. Consequently, the net effect in the domestic feed market of a bushel of corn being used for ethanol production is less than a bushel. For example, the amount of feed (corn and soybean meal) replaced by the DDGS represents about 38% (weight basis) of the corn used in the associated ethanol production process for a given crop year.
According to the USDA, future industry surveys could provide additional information on DDGS substitution for corn and soybean meal, including information on the market share of DDGS consumed by type of livestock/poultry and the substitution rates of DDGS for corn and soybean meal by type of livestock/poultry.

China's anti-dumping case against US DDGS imports could be disruptive to trade

The U.S. Grains Council has released a statement in reposnse to China's anti-dumping case against U.S. DDGS imports, calling the investigation "surprising" and one that "could be disruptive to trade."
"China’s unusual market and supply volatility over the last two years has resulted in new global trade flows," said Grains Council President and CEO Thomas C. Dorr. "As trade flows change, it should perhaps not be surprising there would be an adjustment period in response to unprecedented demand. The United States takes pride in being a reliable supplier of high-quality feed and food grains and its ability to rapidly respond to global market demands." Dorr said the Council looks forward to maintaining its good relationship with China and hopes for a positive resolution to the investigation.

New FDA technique could impact ethanol industry

Controversy over potential antibiotic residues in Distillers Dried Grains with Solubles (DDGS) has led to the development of a technique that could impact the ethanol industry. This multi-residue analytical technique, described in an article published in the Journal of Chromatography by Dr. Hemakanthi DeAlwis and Dr. David Heller of the Food and Drug Administration’s Center for Veterinary Medicine, Office of Research, is designed to detect up to 13 antibiotics in DDGS.
The FDA is expected to start a surveillance program for DDGS. The ethanol industry is said to have relied extensively on antibiotics to suppress lactobacillus bacteria. But with surveillance, ethanol producers may be more selective in using antibiotics and to adopt cleaning procedures accepted for distilling liquor for human consumption.

More distillers grains from US plants

An increased supply of distillers’ grains (DDGS) from biofuel production in the United States seems likely in 2010, with projections that the U.S. plants will boost their corn-based production of ethanol to around 45 billion liters from the 41 billion liters they produced in 2009. Their use of corn is projected to rise by at least 1% to almost 117 million metric tons, compared with about 140 million tons used for livestock feed.
The total 2010 crop is forecast at approximately 334 million tons as U.S. growers increase their corn acreage by an expected 3%. U.S. exports of DDGS for animal feed usage in 2009 represented 18% of the 30.5 million metric tons produced nationally. The largest export markets for the distillers’ grains were Mexico (taking 1.5 million tons), Canada (804,000 tons) and China (542,000 tons).

2009 distillers grains exports break previous record

The U.S. ethanol industry exported 5.64 million metric tons of distillers grains worth nearly $1B in 2009, breaking the previous record set in 2008, according to data released last week by the U.S. Foreign Agricultural Service. Exports in 2009 were 24% above 2008 levels and more than five times higher than the amount of distillers grains exported as animal feed just five years ago.
The top three export markets were Mexico (1.5 million metric tons), Canada (804,000 metric tons) and China (542,000 metric tons). Turkey and Thailand ranked fourth and fifth, respectively.
Total U.S. distillers grains production in 2009 was approximately 30.5 million metric tons.
Ethanol biorefineries produce about one bushel of high-protein distillers grains for every bushel of corn that enters a facility, according to the Renewable Fuels Association. The amount of distillers grains exported in 2009 is equivalent to the feed value of 5.4 million metric tons of whole corn and 1.6 million metric tons of soybean meal, according to displacement ratios developed by Argonne National Laboratory, a U.S. Department of Energy facility.

Avoiding mycotoxins in corn feedstock and DDGS

Fusarium species are responsible for most of the mycotoxin contamination of corn harvested with 14%-plus moisture values in 2009, according to Dr. Frank Jones, professor emeritus and extension specialist with the University of Arkansas. This corn was harvested in areas that experienced high rainfall before and during harvest, said Jones, who recommends that feed manufacturers conduct mycotoxin assays on feed ingredients, particularly DDGS (dried distillers grains with solubles).
Although fusarium molds produce a wide range of toxins, deoxynivalenol—also known as DON or vomitoxin—is the most commonly encountered. Poultry are relatively resistant to DON at dietary levels of up to 10 parts per million. Swine, however, are extremely sensitive and will exhibit feed refusal at a level of one part per million.
DDGS derived from affected batches of corn can show up to three times the concentration of toxins when compared with the corn feedstock. Accordingly, most of the ethanol plants supplying DDGS implement some form of quality control using assays.
Despite these precautions, feed manufacturers—especially those supplying swine herds—are advised to conduct their own tests on ingredients and finished feed using available test kits for DON, aflatoxin and other specific toxins, as requested by clients.
Jones recommends a composite sample of at least 10 pounds to determine the specific mycotoxin content, derived using the U.S. Grain Inspection, Packers and Stockyards Administration recommendation of a single 12-foot probe from each railcar or 5- to 7.5-foot probes from a truck. This helps obtain a representative sample, since toxins may not be evenly distributed in consignments.

Mexican feed company assesses a DDGS increase

A workshop with a group funded by the U.S. Grains Council discussed boosting usage of DDGS (dried distillers grains with solubles) in Mexico, particularly at a commercial feed plant of integrated poultry group Bachoco located in Minatitlan, which currently consumes 24,000 tons per year. Patricia Esqueda, the council's technical director in Mexico and Central America, said that Bachoco has specific clients who want to customize their ruminant feed with Bachoco if it is willing to increase DDGS levels in its commercial diets.
Although the Minatitlan plant has received expert help in previous years to improve pellet quality, the increase in inclusion levels of DDGS may oblige Bachoco to convince its customers to use meal instead of pellets. Information provided to participants during the workshop indicated that this change would not affect animal performance and would simplify operations for Bachoco, especially if it planned to increase DDGS levels in its commercial diets.
Bachoco's use of grain for feed production is around 1.5–1.8 million tons, but Bachoco is looking to increase its imports of DDGS to provide part of that requirement. In Mexico, Bachoco produces 3 million metric tons of feeds annually, according to the U.S. Grains Council. Its 19 plants located throughout Mexico include three that are for commercial feed production. Approximately 80% of the feed tonnage is used for poultry, but the company also makes diets for pigs, ruminants, rabbits and horses and sells pet, tilapia and bird feed.

Turkish mills face feed ingredients shortage

Mills in Turkey expect to run short of some key feed ingredients in the next four to six weeks because of the country's decision to ban the importation of all food and feed products containing genetically modified (GM) components, says U.S. Grains Council (USGC).
Joe O’Brien, USGC regional director in the Middle East and subcontinent, said feedmillers and livestock producers are running out of feed, especially corn and distiller’s dried grains with solubles (DDGS). No progress had been made to reverse or amend Turkey's additional requirements on imports with a GM content. The council said those involved in the import and use of the products are still waiting for the outcome of a court case filed shortly after the regulations were announced.
"Meanwhile, there are vessels near the region that are not able to come into port to deliver essential feed ingredients only available through exports and are circling the area or consigning the cargo into costly bonded facilities, driving up costs," O’Brien said.
Prices for alternatives to corn and DDGS have rapidly increased threatening a standstill in the industry, USGC said. Local feedmillers are banding together to present their case to government officials, commissioning their own scientific research to counter claims that have been made.

Wider plant-to-plant nutritional profile of DDGS likely

But look for more consistency of byproducts to be produced by individual ethanol plants, experts say. Read the full article.

Afta plan removes feed material tariffs

According to reports, the free-trade plan of the Association of Southeast Asian Nations (Asean) will lower feed costs for poultry and hog farmers. The plan is awaiting implementation.The Asean Free Trade Area-Common Effective Preferential Treatment (Afta-Cept) will eliminate tariffs, making alternative feed materials such as tapioca more affordable. The current tapioca tariff is 35%.
Other tariffs to be lifted include those on soybean meal and DDGS at 3%, and soybeans at 1%. Under the new plan, a 35% tariff on yellow corn imposed by Manila, Philippines, will also cease, potentially opening up new markets.