December 1, 2008
US-based CHS Inc profits on increased demand for consistent distillers' grains
Ethanol plants which are able to produce consistent distillers' grains, ethanol's co-product, are securing price premiums for the animal feed ingredient, according to people in the industry.
Sean Broderick of CHS Inc., said because ethanol production is not an exact science and ethanol plants are not uniformly constructed, nutrient and quality variation in distillers' grains is always a concern for both the buyer and seller.
Minnesota-based CHS Inc., previously Cenex Harvest States Cooperative, sells distillers' grains from US ethanol facilities to users in the Lethbridge, Alberta, area.
"Buyers would obviously prefer the product to be the same day in and day out, and for the most part they get that. We do run into problems every once and a while, however, with a batch or batches that are maybe not the same as before from a particular plant," Broderick said.
Problems with product variability tend to be worse in summer than in winter, likely on account of outside heat and humidity affecting the equipment and process, he added.
"There are a lot of people who have figured out how to work with distillers' grains year round, but there are also people who will try to use something different in the summer and then use a little more in the winter," Broderick said.
Also, some facilities are able to produce a consistent product more often than others and as a result can secure premiums for their products, leading also to price variability between plants.
Usually buyers are specific about which plants' product they want or not and they will price accordingly, Broderick said. If supply is not available from their preferred seller they will purchase from another plant but only for a lower price.
As of November 26, the price for distiller's grains delivered to Lethbridge was US$142.00 per short tonne. Depending on quality and consistency, that price could vary by roughly US$5.00 per ton either way, Broderick said.
He noted that the increased availability of cheap feed grains in Canada this year means that end-users can afford to be pickier about the quality of distillers' grains they buy.
"Last summer they were grabbing at anything they could buy and this year they are able to be more selective about the product they purchase," he said.
According to Julie Latremouille, manager of regulatory affairs for the Animal Nutrition Association of Canada, or ANAC, the Canadian feed industry is confident that the current measures which monitor quality and nutrient variability in distillers' grains operate well.
ANAC members are always concerned about the quality and nutrient variability of the product they buy, Latremouille said, but testing and regulation ensure distillers' grains meet industry and client standards.
Feed mills conduct their own tests to monitor quality and nutrient levels. The ethanol plants also test for contaminants, monitor the nutrient variability of their product and ensure that all additives and chemicals used meet regulations set by the Canadian Food Inspection Agency.
Because quality and nutrient levels can vary not just between batches but also between plants, Latremouille said Canadian buyers have tested distillers' grains from various ethanol facilities and have established lists of their preferred suppliers over time.
"Distillers' grains have been around for some time and the established plants have proven themselves," she said.
For the feed industry, the next issue on the horizon will be the use of ethanol co-products made from feed stocks other than corn and wheat, Latremouille said.