DTN Weekly Distillers Grains Update

Grains Council Requests Intervention From Vilsack in China DDG Debacle

The latest in a long list of demands from China on the U.S. ethanol industry has caused the U.S. Grains Council to request help from the U.S. Department of Agriculture.

Julius Schaaf, chairman of the U.S. Grains Council, wrote a letter last week asking U.S. Secretary of Agriculture Tom Vilsack for assistance in China's demand that any shipments of dried distillers grains with solubles arriving in Chinese ports be accompanied by an official letter of certification that it contains no trace of MIR 162, an unapproved GMO variety more commonly known as Agrisure Viptera, produced by Syngenta Ag. That approval would have to come from the U.S. Department of Agriculture.

The council has worked constantly in both its Beijing office and in the U.S. to help facilitate biotech approvals in China, especially to expedite approval of MIR 162, which has been approved in the U.S. since 2010, as well as in the European Union and most other importing countries. However, the trait is not yet approved by Chinese authorities, who seem to be dragging their heels on the approval process, which has been ongoing for more than four years.

The announcement on July 28 is the latest in many demands from the China regarding exports of DDGS. The MIR 162 issue with China began in mid-December when China began rejecting shipments of U.S. DDGS, causing U.S. DDG prices to plummet. That move also prompted China to announce its intention to test all imports of U.S. DDGS for the presence of MIR 162. Another announcement in June that China would stop issuing permits for imports of U.S.-produced dried distillers grains wreaked further havoc on the market, sending DDG prices on an unprecedented downward spiral.

In his letter to Vilsack, Schaaf called China's action "arbitrary, capricious, a major impediment to trade, and a direct threat to the viability not only of DDGS exports but to the U.S. ethanol industry as a whole."

Schaaf continued, "I am writing, therefore, to urge your immediate, direct, and personal intervention with your counterpart in China, Agriculture Minister Han, to halt this current regulatory sabotage of the DDGS trade with China."

Schaaf also asked for renewed efforts by the U.S. government for prompt approval of MIR 162 by China, stating that the trait has been approved in all major markets.

China's request for official certification is impossible, Schaaf said, as suitable tests do not exist.

"...Testing for unapproved traits in DDGS is highly susceptible to false positives, meaning that even cargoes that test negative in the U.S. are quite likely to test positive when retested upon arrival," Schaaf said in his letter. "In addition, some commingling at trace levels is likely to occur in the U.S. grain handling system, making a zero tolerance standard tantamount to an import ban."

Schaaf further argued that China's announcement was issued without notice and provided no window for adjustment, discussion or accommodation and will cause additional sales of DDGS to China to cease. Until this latest announcement, China was importing the equivalent of 750 standard containers per day, at a total value of about $1.6 billion in 2013, he said.

This new demand also does not comply with the provisions of the World Trade Organization's Sanitary and Phytosanitary Agreement, and Schaaf stated there is no scientific basis for China's action.

"The motivation seems clearly to be overtly protectionist and incompatible with China's obligations as a member of the WTO," he said.

EFFECT ON THE MARKET

Jason Charles, domestic export trader with Land O'Lakes Purina Feed LLC in Minneapolis, said the situation with China and predictions of bumper crop are causing DDG prices to continue to fall.

Since China's announcement last week, prices have taken yet another nosedive, as many merchandising firms reported spot prices between $10 and $35 per ton weaker than last week. The DTN weekly DDG spot price average fell another $20 per ton since last week, from $125 per ton on July 25 to $105 this week.

According to Charles, the weakening DDG prices have as much to do with an ever-increasing estimate of production of both corn and soybeans, as they do with China.

"Weather, big corn and bean crops and where we will go with historical production numbers are leaning more on distillers values than the export situation," he said. "We are looking at record crops, so things have to get cheap enough to move it."

Still, Charles said that the situation with China will keep a rain cloud over all protein markets until the U.S. finds other trade flows for its DDG.

He said he believes at some point China will ease up on its restrictions and requirements.

"China has had this GMO policy for a long time. It's nothing new, they just decided to start policing what they enacted," he said. "Eventually they will fix this internally. They can't afford not to have distillers in their domestic livestock rations, GMO or not."

But Charles said he does not expect the change to happen overnight.

"There's too much Chinese bureaucracy for anything to happen in the next 30 to 60 days," he said, "probably not until late October, early November."

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

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IN THE NEWS

Other Countries May Fill China's DDG Gap

It is likely China will not be importing U.S.-produced dried distillers grains with solubles; however, it appears it will not be difficult for the U.S. to divert that trade to other countries, according to an article on Agriculture.com (http://bit.ly/…).

China recently issued a mandate that all shipments of U.S. DDGS landing in its ports must be accompanied by an official certification that they do not contain any traces of the MIR 162 GMO trait. This latest in a long series of GMO-related demands by China has angered U.S. exporters and trade officials, who say the U.S. will never agree to such mandates, especially since reliable testing does not exist.

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A number of other countries are very interested in filling in the gap left by China's trade refusals, according to discussions held at a U.S. Grains Council meeting this week in Omaha.

One such country is Mexico, which is one of the top importers of U.S. DDGS, as well as corn and grain sorghum. Javier Chavez, council market specialist for Mexico, said that the great quality and consistency of DDGS has made it a popular feed ingredient in Mexico, especially after the price decreases in recent months.

The council has worked hard marketing DDGS to Mexico and is currently running a feeding trial in the southern Mexican state of Chiapas proving that DDGS improves efficiency in cattle. Chavez pointed out that there are at least 4 million head of cattle in southern Mexico, which could result in demand for DDGS equaling at least 1 million metric tons.

Other potential growing markets for U.S. DDGS include Central American nations, and Southeast Asia -- an area buying up some of the feed grains diverted from China.

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

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DTN WEEKLY DISTILLERS GRAIN SPOT PRICES

CURRENT PREVIOUS
COMPANY STATE 8/1/2014 7/25/2014 CHANGE
Bartlett and Company, Kansas City, MO (816-753-6300)
Missouri Dry $125 $140 -$15
Modified $65 $70 -$5
CHS, Minneapolis, MN (800-769-1066)
Illinois Dry $95 $135 -$40
Indiana Dry $105 $130 -$25
Iowa Dry $100 $120 -$20
Michigan Dry $125 $160 -$35
Minnesota Dry $90 $100 -$10
North Dakota Dry $90 $95 -$5
New York Dry $140 $150 -$10
South Dakota Dry $90 $95 -$5
Hawkeye Gold, IA (515-663-6413)
Iowa Dry NO $130
Modified NO $44
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
Kansas Dry $110 $125 -$15
POET Nutrition, Sioux Falls, SD (888-327-8799)
Indiana Dry $110 $130 -$20
Iowa Dry $105 $115 -$10
Michigan Dry $130 $165 -$35
Minnesota Dry $105 $115 -$10
Missouri Dry $130 $135 -$5
Ohio Dry $120 $135 -$15
South Dakota Dry $105 $105 $0
United BioEnergy, Wichita, KS (316-616-3521)
Kansas Dry $120 $140 -$20
Wet $40 $45 -$5
Illinois Dry $125 $160 -$35
Nebraska Dry $120 $140 -$20
Wet $40 $45 -$5
Wisconsin Dry $120 $155 -$35
U.S. Commodities, Minneapolis, MN (888-293-1640)
Illinois Dry $100 $130 -$30
Indiana Dry $115 $130 -$15
Iowa Dry $95 $105 -$10
Michigan Dry $120 $140 -$20
Minnesota Dry $90 $100 -$10
Nebraska Dry $90 $100 -$10
New York Dry $135 $150 -$15
North Dakota Dry $85 $100 -$15
Ohio Dry $100 $140 -$40
South Dakota Dry $85 $100 -$15
Wisconsin Dry $100 $120 -$20
Valero Energy Corp., San Antonio, TX (402-727-5300)
Indiana Dry $100 $145 -$45
Iowa Dry $95 $110 -$15
Minnesota Dry $90 $105 -$15
Nebraska Dry $95 $110 -$15
Ohio Dry $105 $150 -$45
South Dakota Dry $90 $100 -$10
Western Milling, Goshen, California (559-302-1074)
California Dry $175 $190 -$15
*Prices listed per ton.
Weekly Average $105 $125 -$20
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 7/31/2014 $3.5700 $127.50
Soybean Meal 7/31/2014 $391.30
DDG Weekly Average Spot Price $105.00
DDG Value Relative to: 8/1 7/25 7/18
Corn 82.35% 96.82% 96.65%
Soybean Meal 26.83% 31.62% 34.43%
Cost Per Unit of Protein:
DDG $4.20 $5.00 $5.24
Soybean Meal $8.24 $8.32 $8.01
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 (July 25, 2014)

Dried Modified Wet
FOB PLANT PRICES PER TON
Iowa 100.00-130.00 44.00-70.00 30.00-35.00
Minnesota 95.00-115.00 50.00 45.00
Nebraska 105.00-130.00 47.50-65.00 29.00-49.00
South Dakota 100.00-105.00 45.00-55.50 20.00-25.00
Wisconsin 118.00-155.00 52.00-75.00 NQ
Eastern Corn Belt 130.00-165.00 72.00-80.00 NQ
Kansas 125.00-140.00 NQ 49.00-60.00
Northern Missouri 140.00-145.00 NQ 45.00-55.00
DELIVERED PRICES PER TON
CIF NOLA 170.00-185.00
Pacific Northwest 162.00-175.00
California 173.00-182.00
Texas Border (metric ton) 196.00-215.00
Lethbridge AB NQ
Chicago 152.00-168.00

Dried Distillers Grain: 10% Moisture
Modified Wet Distillers: 50-55% Moisture
Wet Distillers Grains: 65-70% Moisture

CALIFORNIA WHOLESALE FEEDSTUFF PRICES (Tue Jul 29, 2014)

Distillers Dry Grains 
  Rail Delivered California Points    184.00-185.00  unch-dn 2.00
  Truck California Points             161.00-189.00  dn 28.00-unch
PACIFIC NORTHWEST WEEKLY FEED (Tue Jul 29, 2014)
Offers for Distillers Dried Grains delivered in June by rail to feed mills in the Pacific Northwest were 5.00 to 10.00 lower, from 175.00-185.00. Offers for distillers dried grains trans-loaded onto trucks and delivered during June to Willamette Valley dairies were 2.00 to 13.00 lower, from 190.00-203.00.

*All prices quoted per ton unless otherwise noted.

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RFA WEEKLY U.S. LIVESTOCK FEED PRODUCTION

CO-PRODUCT OUTPUTS (metric tons)
Week Ending Distillers Grains Corn Gluten Feed Corn Gluten Meal Total Feed Corn Oil (lbs.)
7/04/14 92232 9470 1754 103456 4828097
7/11/14 93824 9634 1784 105242 4911430
7/18/14 95416 9797 1814 107027 4994763
7/25/14 94918 9746 1805 106469 4968721

*Information from 2010 Weekly U.S. Fuel Ethanol/Livestock Feed Production report (http://www.ethanolrfa.org/…)

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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) 364-2183-1527, or e-mail cheryl.anderson@dtn.com.

(PH/GH/ES/SK­)

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