The Andersons said it would be grappling "with some time"
with the hit from vomitoxin contamination to its takings from distillers'
grains, even as prices of the corn-derived feed ingredient are staging some recovery.
While all US manufacturers of distillers' grains (DDGs) -
which is made as a byproduct of ethanol output – have suffered from a collapse
in Chinese imports, Andersons flagged a second blow to the price it receives
thanks a quality setback.
The DDGs it produces from its three ethanol plant in the eastern
Corn Belt, in Indiana, Michigan and Ohio, have faced problems with vomitoxin, a
fungal residue, often associated with wet harvest conditions, which can make
grains contaminated with it unfit even for livestock feed.
The vomitoxin, which Andersons imported with corn purchases
to ethanol plants, "resides in the finished product, in DDGs," said Pat Bowe,
the Andersons chief executive, highlighting that this had created a "price
Indeed, the issue "really hurts our DDG returns" at the three
plants, Mr Bowe said, saying that they were below levels seen in the western
Corn Belt, where the group has a further ethanol site, in Iowa.
"It's something that stays with you for a while because
that's what was growing in that [eastern Corn Belt] region.
"We continue to face challenges from vomitoxin issues around
our eastern plants which reduces the value of distillers dried grains."
Indeed, the discount of contaminated DDGs, and the impact on
profits at the three eastern Corn Belt ethanol plants "will be with us for some
time", Mr Bowe told investors.
In fact, the comments came as ethanol manufacturers are
seeing some relief from the downward move in DDGs prices fuelled by the dearth
of imports by China, which has hiked duties on US distillers' grains in
retaliation for what it sees as unfair Washington support in manufacture of the
As of Thursday, DDGs prices as measured in the US Gulf export
market stood at $155 a tonne – up 13.1% over the past month, if down 19% year
on year, according to US Grains Council data.
As an extra boost to ethanol groups, while the revival does
reflect the recovery in grain prices, values of corn have not increased as
fast, at least on export markets, rising by a more modest 5.2% to $171.84 a
tonne in the Gulf.
The dynamics have trimmed corn's, unusual, premium to DDGs to
$16.84 a tonne - a plunge of 43% month on month.