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Vomitoxin problem in DDGs to last 'for some time' - Andersons

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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 discount".

'Really hurts'

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.

Discount narrows

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 feed ingredient.

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.

By Mike Verdin

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