July 2014 Ethanol Producer Magazine

INSIDE: TRAIN DELAYS CAUSE LOGISTICAL NIGHTMARE JULY 2014

Eye On Aquaculture Coproducts Reel In Booming Market Page 32

Plus

FDA Proposed Rules Suggest Changes Ahead

Page 38

Creative Product Placement

Page 54

Study Reveals Benefit To Low-Oil DDGS

Page 48

www.EthanolProducer.com

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CONTENTS

JULY 2014

DEPARTMENTS 6

EDITOR'S NOTE

7

AD INDEX

10

THE WAY I SEE IT

11

EVENTS CALENDAR

12

VIEW FROM THE HILL

14

DRIVE

16

GRASSROOTS VOICE

18

EUROPE CALLING

20

BUSINESS BRIEFS

22

COMMODITIES

26

DISTILLED

62

TALKING POINT

VOLUME 20 ISSUE 7

FEATURES

Aquaculture Ready To Net DDGS

By Tom Bryan

Time For An Environmental Rethink

By Mike Bryan

Trade Focus: China

By Bob Dinneen

32

38

NEW MARKETS

REGULATION

Ethanol coproducts show promise as part of aquaculture ration

By Holly Jessen

Producers face new set of recordkeeping and manufacturing requirements

By Susanne Retka Schill

Fishing For Profit

Beyond Feed

Let’s Declare Independence From Big Oil

By Tom Buis Ethanol’s ‘Power by People’

By Brian Jennings Paradigm Shift Needed

By Robert Vierhout

44

VALUE-ADDED

Complementary Strategies For Success

Distillers grains product manufacturers collaborate

By Chris Hanson

Byproduct Evolves Into Preferred Feed Ingredient

By Kurt Rosentrater

64

BUSINESS MATTERS

66

MARKETPLACE

Prairie AquaTech staff, left to right, Tim Bruce, Jason Bootsma and Mary Beth Fishback stand in the South Dakota facility.

PHOTO: JAY FISHBACK

Q&A

Doctor DDGS

Low-oil DDGS shows benefits in study of growing-finishing pigs

By Ron Kotrba

CONTRIBUTIONS 56 EXPORTS The Customer Calls The Shots

Beware Wage And Hour Law Traps

By Megan E. Moritz

ON THE COVER

48

Ethanol producers get help in meeting requirements to ship DDGS to China

By Tom Sleight

50

TRANSPORTATION

Stuck At The Station

Slow rail traffic causes issues for producers, marketers

By Chris Hanson

60 ENGINEERING Industrial Facilities Turn To HDS For Retrofits, Expansion

New high-definition technology speeds up surveying

By Mike Hoffman

CORRECTION: A column in the June issue of the magazine contained an incorrect calculation.

Based on projections of 13 billion bushels for the 2014 corn crop, ethanol will consume 29.2 percent of the U.S. corn crop, when the contribution of distillers grains is included.

Ethanol Producer Magazine: (USPS No. 023-974) July 2014, Vol. 20, Issue 7. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

4 | Ethanol Producer Magazine | JULY 2014

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EDITOR'S NOTE

Aquaculture Ready To Net DDGS Discerning anglers will tell you those small yellow perch in the hands of the folks on our cover aren’t keepers by Minnesota fishing standards, but the aquaculture industry that grows them may soon be hooked on distillers grains. We’ve all heard about DDGS as a

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

fish feed, but it’s always been a novel market most of us have brushed off. No longer, says the University of Minnesota’s Jerry Shurson, who appears in our lead story and also in this month’s Q&A. In “Fishing For Profit,” on page 32, Shurson tells us that aquaculture could be the next big thing for corn ethanol’s principal coproduct. “It’s one of the little known stories about future markets that really has not been developed to its fullest extent,” he says.

Managing Editor Holly Jessen reports that the growth of aquaculture, globally, is expected to drive up the demand for plant-based protein substitutes for fish meal. We learn, for example, about one producer that’s virtually tailored its DDGS for fish. The worldwide aquaculture market, now 70 million metric tons per year, is attracting the attention of feed product manufacturers, including one pursuing microbial adaptations of DDGS and others that are introducing entirely new aquaculture products like yeast protein concentrate and bacterial biomass. As Jessen reports, the demand for new fish feed ingredients is virtually a sure bet.

In “Beyond Feed,” on page 38, we turn our attention to the looming regulatory issues that producers of distillers grains will soon face. Senior Editor Susanne Retka Schill reports that, under the forthcoming Food Safety Modernization Act, the ethanol industry is not just facing new recordkeeping and manufacturing requirements, but the watchful eye of the U.S. Food and Drug Administration. The feed industry disagrees with the assertion that animal feed needs to be produced under the same hygienic standards as human food, but industry veterans like Purina’s Harold Tilstra and Gavilon’s Randy Ives say it’s best to embrace the standards and accept that distillers grains is being considered part of the human food chain by the FDA. Also this month, we look at how two distillers grains product manufacturers are collaborating. In “Complementary Strategies For Success,” on page 44, we look at SweetPro’s effort to incorporate biodegradable materials into its DDGS blocks. The feed company is working with Laurel BioComposite LLC to make DDGS-based containers for its products.

The product is sustainable, strong and price competitive with traditional petroleum-based resin containers.

Finally, we examine the logistical challenges producers faced this past winter with delays caused by severe winter weather and increased rail traffic. In “Stuck At The Station,” on page 50, we report that product shipments that normally take a couple of days to get moving were taking up to 10 days this winter. Delays caused by congestion from increased North American crude oil production is yet another row in the strained relationship between U.S. ethanol producers and their Big Oil customers. The degree to which movement on the rails this summer eases will be telling.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | JULY 2014

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 20 ISSUE 7

ADVERTISER INDEX EDITORIAL

Ashland Water Technologies 2014 National Advanced Biofuels Conference

President & Editor in Chief Tom Bryan tbryan@bbiinternational.com

2015 Fuel Ethanol Workshop & Expo

Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com

BBI Project Development BetaTec Hop Products

Managing Editor Holly Jessen hjessen@bbiinternational.com

Buckman Burns & McDonnell

Senior Editior Susanne Retka Schill sretkaschill@bbiinternational.com

Cloud/Sellers Cleaning Systems DuPont Industrial Biosciences

News Editor Erin Voegele evoegele@bbiinternational.com

Fagen Inc.

Staff Writer Chris Hanson chanson@bbiinternational.com

GreenShift Corporation

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

Hydro-Klean LLC

Fluid Quip Process Technologies, LLC Growth Energy ICM, Inc. Inbicon

ART

Interra Global Corporation

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

INTL FCStone Inc. Iowa Economic Development Authority

Graphic Designer Raquel Boushee rboushee@bbiinternational.com

Jatrodiesel, Inc. Lallemand Biofuels & Distilled Spirits

PUBLISHING

Magnetec Inspection, Inc. Mist Chemical & Supply Company

Chairman Mike Bryan mbryan@bbiinternational.com

Mole Master Services Corporation Nalco, an Ecolab Company

CEO Joe Bryan jbryan@bbiinternational.com

Natwick Associates Appraisal Phibro Ethanol Performance Group

SALES

POET-DSM Advanced Biofuels

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com

Premium Plant Services, Inc.

Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com

Renewable Fuels Association

Protectoseal Company, The RPMG, Inc.

Senior Account Manager Chip Shereck cshereck@bbiinternational.com

Syngenta: Enogen

Marketing Director John Nelson jnelson@bbiinternational.com

Trinity Rail Group

Tower Performance, Inc. U.S. Water Services Verenium

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com

Vogelbusch USA, Inc Wabash Power Equipment

Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

West Agro Executive Brands WINBCO

8 63 67 47 9 26 27 46 68 3 43 20 2 21 11 24-25 41 42 5 36 13 34 52 55 54 58 19 15 37 29 30 61 17 40 65 59 31 53 57 28 35

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for anyone outside the United States. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to hjessen@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

Please recycle this magazine and remove inserts or samples before recycling

COPYRIGHT Š 2014 by BBI International TM

JULY 2014 | Ethanol Producer Magazine | 7

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THE WAY I SEE IT

Time for An Environmental Rethink

By Mike Bryan

On occasion, I update folks on what’s going on in Australia (Down Under, as they say). First,

because I live here and, second, because Australia, an ultramodern, first world country, is of interest to many on a global scale.

Last September, the Liberal Party (similar to U.S. Republicans) won in a landslide victory over the Labor Party (similar to U.S. Democrats). Now I will be the last to say that the Labor Party, which had been in office for six years, was an environmental giant, but since the election, the country has rapidly begun the process of negating almost all of the environmental programs that were in place.

The carbon tax, designed to reduce carbon emissions from the country’s biggest emitters, is set to be repealed in July of this year. The government has called for the abolishment of the Clean Energy Council, an organization established to oversee the establishment of clean energy programs.

Additionally, they have said that they will cut funding to the Clean Energy Finance Corporation. The CEFC had billions of dollars allocated to it to help develop, with private industry, renewable energy projects.

The Treasurer of Australia, Joe Hockey has openly stated that the few wind farms that he sees on his drive to Parliament are obnoxious and offensive and funding for such development should be terminated. Over 70,000 hectares (nearly 173,000 acres) of natural forest in the State of Tasmania has been taken off the list of protected areas and the government will allow large areas of it to be harvested. The tax credits for renewable fuels like ethanol and biodiesel are on the hit list for elimination. At the same time, coal is being used in record amounts because it’s plentiful and cheap. This is in a country that has so many natural renewable feedstocks available to it that it boggles the imagination.

Australia has more sunshine than almost any country in the world, yet industrial-size solar projects struggle to get built.

10 | Ethanol Producer Magazine | JULY 2014

Wind is another major source of potential renewable energy with millions of hectares of open space, yet there is very little assistance from government to develop it and, in fact, as I stated earlier, some in government find it repugnant.

Australia is surrounded by oceans. There is enough energy in tidal and wave power to generate enough electricity to completely power the country of 23 million people. Enormous sources of biomass exist in forest trimmings, field residue, and municipal solid waste. Geothermal power could provide a significant energy source in numerous parts of the country.

If I sound like I am trashing Australia, I’m not. Australia is a beautiful country with great people, a strong economy and a wonderful environment. Perhaps that’s part of the problem.

The air here is clean and so the urgency to act does not seem very pressing. Yet, Australia thumps its chest and boasts of its clean air while exporting millions of metric tons of coal to China to pollute its environment. It’s time for a major rethink of the strategies that drive the environmental agenda of Australia. The chance, however, of that happening under the current government is negligible.

That’s the way I see it!

Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com

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VIEW FROM THE HILL

Trade Focus: China

By Bob Dinneen

China is a country with limitless potential and ever-increasing possibilities.

According to the U.S. State Department, trade between the U.S. and China has grown from $33 billion in 1992 to $538 billion in 2012. That is a 1,530 percent increase in just 20 years. That is why the Renewable Fuels Association recently joined a trip to China led by USDA Under Secretary Michael Scuse. The group, including the RFA’s Kelly Davis and Growth Energy’s Jim Miller, visited the lesser-traveled northeast region of China, home to 110 million people, to reinforce our current relationships in the region and develop additional markets for U.S. agricultural products including ethanol and dried distillers grains with solubles (DDGS).

The trade mission observed a rapidly growing economy in northeastern China while visiting the city of Dalian, home to 4.5 million residents. Signs of growth are everywhere, from new high-rise apartments forming a new skyline to the shift from street markets to grocery stores over the past 10 years.

Families in China’s expanding middle class are eager to buy their first cars. Twenty million vehicles were purchased in China last year, compared to the approximately 14 million vehicles U.S. consumers will buy this year. Continued urbanization and rise in vehicle demand has led to an increased demand for gasoline.

The mission began with a focus on expanding agriculture markets in China. It included a visit to Huishan Dairy and the Chinese beef company Haoyue. Both were found both to be modern, fully integrated facilities utilizing DDGS. China is the leading importer of American DDGS. It clearly sees the benefit of the high-protein, lightweight, easy-to-ship feedstock.

In March, China purchased more than half of all American

12 | Ethanol Producer Magazine | JULY 2014

exported DDGS, with Mexico and South Korea topping off the top three. March set the monthly record for U.S. DDGS exports. If the U.S. continues at the pace we’re going, we will break all previous records for DDGS exports.

The focus then shifted to expanding ethanol markets as the group toured the Sinopec fuel ethanol plant in Chanchun and traveled to Jilin to visit a 175 MMgy corn ethanol plant. Today, a large portion of China’s gasoline is actually blended with MTBE and low-level methanol blends. Ethanol is currently blended in only six Chinese provinces and accounts for less than one percent of the fuel supply. There is tremendous room for growth, but China currently bans the import of food-based ethanol. However, these restrictions might be removable at the provincial level, making it possible to find a location willing to change policy or start a new program that allows imports.

In addition to combatting the food myth, the delegation detailed the economic and environmental benefits of U.S. produced high-octane, low-cost ethanol to the National Energy Administration and state-owned oil companies in an effort to open China’s gasoline market to more ethanol.

RFA planted the seeds for American exports. Now we must tend the field and watch them grow.

Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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DRIVE

Let’s Declare Independence From Big Oil

By Tom Buis

This year we celebrate the 238th anniversary of the Declaration of Independence. On the Fourth

of July our founding fathers began the arduous task of establishing a new nation outside the grasp of tyranny. Today we face a new tyranny, not from a far off ruler trying to impose taxes, but from a variety of kingdoms and oppressive groups attacking our economic and energy independence.

Luckily, we have the ability to again declare our freedom from this oppression. Foreign oil threatens our security, our economic strength and takes our hard-earned dollars outside our borders.

Ethanol is our renewed declaration of energy independence.

The ethanol industry has created nearly 400,000 jobs, with the opportunity for up to 136,000 more, if we move to E15. These jobs are here at home and cannot be sent overseas. Americans produce the corn and other renewable fuel feedstock to produce the ethanol that Americans and many others around the world use as fuel, returning dollars into our domestic economy. The jobs created at home stimulate the economy further by creating jobs for grocers, service providers and others within the community who rely on the ability of the ethanol workforce and farmers to be able to support their families.

Our citizens outside of the ethanol industry and our rural communities also benefit from this revolutionary fuel. Emissions are reduced, providing cleaner air for us and our children. Cleaner burning ethanol provides measurable reductions in the amount of greenhouse gas emissions, equivalent to removing 8 million cars from the road each year. The renewable fuel standard (RFS) alone has the ability to reduce greenhouse gas emissions to equate to 27 million cars off the roads by 2022.

Higher blends such as E15 will only increase our ability to preserve our environment while revitalizing our economy. By

14 | Ethanol Producer Magazine | JULY 2014

reducing greenhouse gases by 59 percent, E15 represents the best currently approved fuel choice we have in the fight against climate change.

All of these benefits come with consumers’ freedom to choose their own fuel. And while ethanol already reduces the price to fill up by as much as $1.09 per gallon, higher blends have the ability to further reduce costs to consumers. We want to expand their choice to save money, utilize a cleaner fuel and help improve our environment.

It is no surprise that when faced with possible loss of market share, the oil industry fights so vehemently to keep us out of consumers’ gas tanks, reducing available options to their consumers. But we have fought back. Growth Energy is actively fighting to preserve the RFS and we are continuing to lead the charge to expand consumer choice and options for fuel.

But these benefits and freedoms can only truly be realized if we can further break Big Oil’s grip on the fuel market. Despite the best efforts of the oil industry to keep their monopoly, we have succeeded in pushing back. Today, retailers are expanding E15 across the country. We are winning. Now is the time to declare our energy independence. Continue to contact your leaders and share the benefits of ethanol with your neighbors. Americans deserve the ability to choose their fuel, bolster our rural economies, keep our money within our own country and help mitigate climate change for future generations.

Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

For years, we’ve been told that cellulosic ethanol is a “fantasy fuel.” And it is.

And now it’s going to change the world. For real.

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GRASSROOTS VOICE

Ethanol’s ‘Power By People’

By Brian Jennings

The American Coalition for Ethanol recently launched a new campaign built upon the personal stories, authenticity and persuasiveness of our members and other people in the business of ethanol. Our campaign, "Power by People", compliments

the industry-wide effort, through Fuels America, to defend the renewable fuel standard and higher blends by going on offense and being positive about the human good ethanol delivers.

It will feature a more engaging experience at www.ethanol. org, social media friendly videos and infographics that are easily sharable, and some paid advertising.

We’re doing this to turn the tables on opponents who are trying to scare people by saying things like E15 will ruin your engine, the RFS drives up food prices and high RIN prices mean high pump prices. Opponents are also playing to people’s emotions by stereotyping the RFS as a heavy-handed U.S. EPA mandate.

While ethanol opponents are appealing to peoples’ fears, we’ve been fighting fear with facts. A common refrain within our industry is, the facts are on our side, we just need to get the facts out there. We just need to tell our story.

ACE has concluded that we can’t keep pouring all our trust, hard work and money into publicizing just the facts—reams of studies, detailed spreadsheet and bullet points supported by footnotes—in response to attacks with the hope that we’ll win over more political and public support for ethanol.

In other words, we can’t keep doing things the way we’ve been doing them and hope for a better result.

For most people, desire doesn’t come from data. We need to have the sophistication to appreciate that emotions are part of every decision people make. There’s an old adage about winning the hearts and minds, a recognition that facts alone do little to captivate people’s attention and that we need to strike a smarter balance between data and emotion.

ACE believes ethanol is first and foremost about people.

A profile in courage about ordinary people who joined forces,

16 | Ethanol Producer Magazine | JULY 2014

without any template or precedent to guide them, to commit their own money and time to rescue their families, neighbors and communities by building locally owned businesses in their towns.

Jobs were created and profits stayed at home.

For far too long, the people of ethanol—and their stories— have been overlooked.

Surveys confirm that people are most likely to be convinced by other people with whom they can relate. If we tap into the sincerity and authenticity of the grassroots—why they make ethanol, why they care about ethanol and why ethanol is good no matter who you are or where you are from—we can capitalize on that emotional and human domain to show and tell the stories behind the facts. So ACE is challenging the status quo by trying to connect with people on a deeper level, an emotional level.

This is not to say we should abandon the facts. The facts are absolutely on ethanol’s side, and we absolutely need to get the facts out there. But we’re going to try to deliver those facts in a more interesting wrapper, to make rational arguments about ethanol by appealing to people’s hearts and minds.

ACE is uniquely positioned to do this because we are the grassroots voice of ethanol. ACE members represent the heart and soul, the sharpest minds of the industry and come from various walks of life. They have experiences that can help us convey that ethanol shouldn’t merely be valued by the barrels of foreign oil and the tons of greenhouse gas emissions it displaces, it should also be measured based on the human good it delivers.

And we don’t have to be dishonest or scare people. Because when the people of ethanol are showing and telling our story, it is a positive story. Ethanol has power by people.

Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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EUROPE CALLING

Paradigm Shift Needed

By Robert Vierhout

Different jurisdictions can have different reasons for promoting renewable fuels. When

Brazil started its pro-alcohol program in the ’70s, it was mainly to find a domestic replacement for much-too-expensive foreign oil.

In the U.S., it was very much an agricultural driver, providing corn growers with a new market and, later, reducing imports of oil from politically unstable countries, a pretty important issue too.

In Europe, the discussion on renewables has always, and too much, been dominated by the environmental effects. What originally in Europe started as an instrument of energy policy is now strongly influenced and managed by environmental policymakers.

In that sense, there is an interesting parallel between the U.S. and the European Union. In the United States too, the U.S. EPA is very much calling the shots nowadays.

Does it make sense to put so much emphasis on the environmental benefits?

Certainly, environmental performance is important. But I have the feeling that in Europe we have turned a blind eye to all the other benefits renewable fuels can bring. For example, using domestic sources to produce part of our energy needs.

The time seems to be right to shift gears in the debate on biofuels and there are some pretty good reasons to do this. Here are a few.

At present, 85 percent of Europe’s oil is imported and forecasts indicate that this share of oil imports will likely increase even further by 2030.

In the EU transport sector, 94 percent of the fuels used are fossil-based.

The EU's oil bill currently stands at 1 billion euros($1.3 billion) a day.

Europe needs to import 20 percent of its diesel needs; most of

18 | Ethanol Producer Magazine | JULY 2014

it is coming from Russia.

And whether we like it or not, we are running out of oil.

We can speculate long about when "peak of oil" will happen but someday it will (or maybe it has already happened).

These are ample reasons to put more emphasis on why biofuels are also needed: reducing our dependency on fossil fuels and the security of our energy supply.

Slowly, a shift seems to be happening. Security of energy supply is getting higher on the political agenda, mainly caused by the recent turmoil in the Ukraine. Even though the concerns are mainly about gas for heating and electricity production, one cannot exclude that one of these days diesel flows will be curtailed.

We better not wait for that day. Let’s start thinking about how we can increase domestic fuel production to hedge against such a scenario and use biofuels in a smarter way at the same time.

We don't need to reinvent the wheel to accomplish the latter.

The EU has legislation that forces every member state to maintain a strategic storage of crude to cope with unforeseen circumstances.

Why wouldn't we add a provision that member states should also maintain a strategic storage of biofuels?

Hopefully, the debate on cheaper energy that is now taking place in Europe will widen to securing energy supply. Biofuels can play a part in this. It is time for a shift in thinking about biofuels and what these fuels can deliver for society in securing part of our energy needs.

Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

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Phibro delivers proven microbial control solutions to ethanol producers worldwide. What can our Authorized Fermentation Consultants do for you?

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BUSINESS BRIEFS

People, Partnerships & Deals

winners include Archer Daniels Midland Co., Bunge Corp., Cardinal Ethanol LLC, Cargill, POET Biorefining and Valero.

Krieger

Humphrey

Superior Industries has appointed Kevin Krieger as territory sales manager throughout the Mountain and Northwest regions of the U.S. He most recently served as a territory manager for Fenner Dunlop. The company has also appointed Bill Humphrey as territory sales manager throughout the Great Lakes and Ohio River Valley regions. He was most recently employed by Aggregates Manufacturing International. Krieger and Humphrey will work closely with dealers in their respective regions to bring innovative conveying equipment to bulk materials producers.

CSX has announced winners of its 20th annual Chemical Safety Excellence Award, which recognizes customers for their commitment to safe transportation of hazardous materials by rail. This year’s

20 | Ethanol Producer Magazine | JULY 2014

Hasan Atiyeh, assistant professor in biosytems and agricultural engineering at Oklahoma State University, recently received a South Central Sun Grant Award to advance the development of Atiyeh a new hybrid gasification-syngas fermentation technology.

Premium Plant Services Inc. has announced a new service center in Dubuque, Iowa. The new location will service plants in Iowa, Wisconsin, Illinois, Indiana and Ohio. The company also has service centers in Hibbing, Minn., and Tracy, Minn.

Three Rivers Energy LLC has joined Growth Energy. Three Rivers Energy is a 50 MMgy facility located in Coshocton, Ohio.

The National Corn-to-Ethanol Research Center at Southern Illinois University Edwardsville has added Parisa Fallahi to its research team. She is a postdoctoral fellow specializing in ethanol Fallahi coproducts research.

Fallahi received her master’s degree in chemical engineering from Azad University,Tehran, Iran, and a doctorate in biological sciences and agriculture and biosystems engineering from South Dakota State University.

Syngenta has announced an agreement with Cellulosic Ethanol Technologies LLC, a wholly owned subsidiary of Quad County Corn Processors, to license its Adding Cellulosic Ethanol technology.

Poet Biorefining—Preston has announced Chris Hanson as its new general manager. Hanson was previously employed as technical manager of the plant. He will now be responsible for overseeing the 46 MMgy facility.

Purdue University researchers are launching Spero Energy Inc. to develop technology that can make high-value chemical products from lignin with simultaneous producAbu-Omar tion of lignin-free cellulose in one step using a catalytic process. The technology portfolio is based on research efforts at Purdue’s Center for Direct Catalytic Conversion of Biomass to Biofuels (C3Bio). The company will be led by Mahdi Abu-Omar, the R.B. Wetherill Professor of chemistry and chemical engineering and associate director of C3Bio. Siouxland Energy and Livestock Cooperative has changed its name to Siouxland Energy Cooperative. The change aligns the company name with its mission of returning value to members’ corn through the best cost production in the renewable fuels industry.

Anna Wildeman, an attorney at Michael Best & Friedrich LLP, has been named one of Super Lawyers Magazine’s 2014 Washington, D.C., Rising Stars. She is a member of Michael Best’s EnWildeman ergy Practice Group and Agribusiness, Food Processing & Distribution Group.

U.S. Water Services Inc. has announced the acquisition of Water Chemical Service Inc. (Waterchem). The acquisition includes Waterchem’s corporate headquarters and production facility in Aberdeen, Md., and surrounding sales territories. The acquisition is expected to increase U.S. Water’s presence on the East Coast and adds to its pathogen control capabilities nationally.

Purthanol Resources Ltd. has completed negotiations with Dorax Investment Co. Ltd. to finance the acquisition of 60 ethanol modules for a total of $39 million.

The modules will be used to demonstrate the Purthanol process, which produces sorghum ethanol.

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Tae Seok Moon, an assistant professor of energy, environmental and chemical engineering at Washington University in St. Louis, has received a prestigious Faculty Early Career Development Award from Moon the National Science Foundation for his project, titled â&#x20AC;&#x153;Engineering Biological Robustness Through Synthetic Control.â&#x20AC;? Moon received a five-year $400,000 grant to understand the principles of biological robustness by using synthetic DNA in basic bacteria cells. The research could have implications for biofuel production and several other industries.

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JULY 2014 | Ethanol Producer Magazine | 21

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Wet, cold April confounds forecasting models May 16—While April confounded forecasting models, May could be the antidote. Where April was consistently colder than normal, May has been more or less in line with historical temperature norms. Combined with the fact that May is typically one of the lowest demand months, it will provide a chance to get a clearer picture regarding the overall supply, demand balance of the market.

The early returns are perhaps best described as guardedly encouraging. While April saw anemic growth in domestic production, May has seen a slight uptick, reaching as high as 68 billion cubic feet (Bcf) per day. While power demand continues to remain sticky and higher than analysts might expect, given a relatively elevated price compared to 2013, industrial demand has been a pleasant surprise, coming in almost 1 Bcf per day lower than the April 2014 level and contributing solidly to injections that have met or exceeded analyst expectations over the first few weeks of the month. In the big picture, May will not make or break end-of-season inventory levels, but it does provide some insight into whether there will be a comfortable amount of natural gas stored for the upcoming winter. It looks like the market will be able to scrape by getting inventories back to

by Ben Straus

roughly 3,500 Bcf on higher production levels. That should be sufficient, if not comfortable for the upcoming winter.

Corn Report

Fund-led rally leads to $5 cash prices

by Jason Sagebiel

May 16—Producers got 59 percent of the corn crop planted in ear- are projected at 1.726 billion bushels or 580 million bushels higher than ly May. Unfortunately, emergence may slow with cold and wet weather. the current projection. At face value, that should weigh on prices.

Despite bullish data figures on USDA’s May report, funds were sellers in the third week of May. July corn futures traded as high as $5.2225 on the day of the report release and by the next Friday, July corn had traded down to $4.8025. The funds had reached a long position in mid-May, leading to corn sales often reaching $5 cash prices.

Since December the carryout of the current crop has declined from 1.792 billion bushels to 1.146 billion bushels, justifying the rally.

Overall demand continues its increasing pace as ethanol production is projected to consume 5.050 billion bushels. The bigger demand growth has in 1.90 billion bushels of exports, 14 percent of the corn demand compared to 6 percent a year ago. Overall, feed demand is 5.30 billion bushels as compared to 4.33 billion bushels a year ago.

USDA’s projected yield in May was just above trend line at 165.3 bushels per acre, resulting in production being 13.935 billion bushels.

Demand was calculated with feed using 5.25 billion bushels; exports 1.70 billion bushels, ethanol 5.050 billion bushels and other industries using 1.385 billion bushels. Overall demand is at 13.385 billion bushels versus 13.635 billion in the current marketing year. Therefore, ending stocks 22 | Ethanol Producer Magazine | JULY 2014

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $2.9735 Region

Spot

Rack

West Coast

3.095

3.185

Midwest

3.007

3.095

East Coast

2.827

3.182

DDGS Report

SOURCE: DTN

Regional Gasoline Prices ($/gallon)

China’s political climate biggest impact on

by Sean Broderick DDGS pricing May 16—As Memorial Day approached, all eyes were on planting progress. DDGS prices have been falling lately in conjunction with corn, as pastures start to green up and cattle start to leave the feedlot. Ethanol margins look pretty rosy for the next couple of quarters, so distillers grain production does not look as though it will be an issue. But demand could.

On a domestic basis, demand overall looks good. Meat and milk producers have a pretty good profitability curve and should be looking at locking in some margins. We have not seen a full-scale adoption of that process but feeders have been cutting their inbound commodity pipeline pretty close lately, which will be a hard habit to change. It has been a while since feeding margins have been present in the quarter ahead.

In the export market, China is the one to watch. There were almost a million tons exported there in March and any noticeable drops so far for April and May have not been felt. There is still the MIR 162 “elephant in the room” (China denied U.S. corn in November 2013 after finding corn with this unapproved trait) but there has not been any news out of Beijing lately as to whether a nonapproved genetically modified organism ban will be enforced in DDGS. Obviously, any move like that will take a lot of steam out of prices.

Looking ahead, China and corn planting will be the focus to determine pricing.

The logistical issues that tightened the market all winter are abating but still not back to normal. In the end, though, the political climate in China is going to affect the market the most.

Front Month Futures Price (RBOB) $3.054 Region

Spot

Rack

West Coast

3.165

3.342

Midwest

3.107

3.639

East Coast

2.920

3.182 SOURCE: DTN

DDGS Prices ($/ton) Location

Jul 2014

Ethanol supplies, prices prepare for summer

by Rick Kment demand May 16—It appears ethanol and gasoline markets will be contained in a moderate trading range through the end of May, with traders focusing on uncertainty about summer demand support. Choppy movement in the stock market and other economic factors seen this spring have led to a cautious attitude among traders trying to project just how strong summer driving demand will be.

Typically the gasoline market peaks right around Memorial Day weekend, but it may be that spring market peak was established in the middle of April. There is growing focus on ethanol supply and

production growth through the first two weeks of May. The concern is that if demand for ethanol and gasoline does not significantly improve during and after the Memorial Day weekend, commercial buyers may quickly liquidate short-term positions and erode current prices.

June ethanol futures were trading at $2.24 per gallon in mid-May and may continue to trade in an extremely wide range between $2 and $2.40 per gallon. This could add even more volatility to the market through early summer.

Jul 2013

Minnesota

210

225

225

Chicago

233

255

255

Buffalo, N.Y.

255

270

230

Central Calif.

270

318

277

Central Fla.

261

280

264 SOURCE: CHS Inc.

Corn Futures Prices

(May Futures, $/bushel) Date

High

Low

Close

May 16, 2014

4.87

4.80 1/4

4.83 1/2

Apr 16, 2014

5.10 3/4

5.01

5.03 1/2

May 16, 2013

6.52

6.40 1/4

6.41 1/2 SOURCE: FCStone

Cash Sorghum ($/bushel) Location

Ethanol Report

Jun 2014

May 31, 2013

April 17, 2014

May 15, 2014

Superior, Neb.

6.67

4.65

4.48

Beatrice, Neb.

6.82

4.50

4.39

Sublette, Kan.

6.53

4.77

4.59

Salina, Kan.

6.82

4.55

4.59

Triangle, Texas

6.67

4.93

4.76

Gulf, Texas

6.22

5.95

5.57

SOURCE: Sorghum Synergies

Natural Gas Prices ($/MMBtu) Location

May 23, 2014

March 31, 2014

May 23, 2013

NYMEX

4.37

4.37

4.26

NNG Ventura

4.50

4.52

4.11

CA Citygate

4.86

4.81

4.39

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production (1,000 barrels) Per Day

Month

End Stocks

FEB 2014

907

25,401

16,834

JAN 2014

914

28,344

17,086

FEB 2013

809

22,645

19,580

SOURCE: U.S. Energy Information Administration

JULY 2014 | Ethanol Producer Magazine | 23

The same DONG Power P ower your old Energy ethanolwho ethanol plant pioneered clean with with New Ethanol power shrinks your production. production. carbon score.

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DISTILLED Kansas ethanol plant to add renewable diesel production Prairie Horizon Agri-Energy has formed a partnership with WB Services LLC to integrate a 3 MMGy renewable diesel production facility into the company’s existing 40 MMgy ethanol plant in Phillipsburg, Kan. Under the partnership, WB Services will design, construct and operate the renewable diesel plant, which will utilize patented renewable diesel process technology. Once complete, the facility will produce denaturant, fuel gas and steam, in addition to renewable diesel. Design work on the project is already underway, with construction scheduled to begin midyear.

“This plant will be the first of its kind— the first renewable diesel plant to fully integrate into an existing ethanol operation,” said Ron Beemiller, president and CEO of WB Services.

“This is a very exciting time for both Prairie Horizon Agri-Energy and WB Services.”

Prairie Horizon Agri-Energy also has a significant investment in renewable and biodiesel plants under construction by Green Energy Products in Sedgwick, Kan.

Ethanol News & Trends

US impact of the RFS Jobs Direct impact Agriculture Manufacturing Wholesale W Retail Total direct impact Total induced imapct Total impact

238,989 23,873 5,650 23,654 292,166 226,098 852,056

Wages

(in billions)

$9.92 $3.27 $0.49 $0.89 $14.58 $11.65 $46.20

Study shows economic benefits of biofuels Fuels America has released an economic impact study that demonstrates the economic benefits of biofuels on a state-by-state basis.

The analysis, completed by John Dunham & Associates, accounts for the entire renewable fuel supply chain and quantifies the impact on the economy.

“The renewable fuels industry now supports more than $184 billion of economic output. It supports more than 852,000 jobs in over $56 billion in wages and it generates about $14.5

billion in local and state tax revenue every year,” said Jon Doggett, vice president of public policy at the National Corn Growers Association, during an event to announce the study. The impact of biofuels, however, goes far beyond the numbers, he continued. Doggett explained that biofuels and the renewable fuel standard have helped support family farming in the U.S., as better economic conditions have allowed more children to join their family farming operations.

or that

Buckman takes a wider view.

Some chemical companies focus only on process.

Some focus solely on water treatment. Buckman takes a comprehensive approach and looks at the bigger picture — return on investment and environment.

We look at every aspect of your plant’s operation,

26 | Ethanol Producer Magazine | JULY 2014

$31.88 $43.64 $1.24 $1.80 $78.56 $35.79 $184.47

SOURCE: FUELS AMERICA

Some chemical companies focus on this

© 2014 Buckman Laboratories International, Inc. All rights reserved.

Output

(in billions)

tailoring chemistries to boost production and increase profitability — from evaporator efficiency to corn oil recovery to water treatment issues. To find out more or to schedule a system audit, contact your Buckman representative or email ethanol@buckman.com.

.

DISTILLED

Canada takes action on railcar safety In late April, the Canadian government announced a plan to improve rail safety. Effectively immediately, the least crash-resistant DOT-111 railcars are being removed from dangerous goods service. These cars include those not equipped with continuous bottom reinforcement. An estimated 5,000 North American railcars will be affected.

The Canadian government is also requiring DOT-111 tank cars used to transport crude oil and ethanol that do not meet certain standards to be phased out or retrofitted within three years. The referenced standards include thicker steel and additional top fitting and heat shield protection.

Additional new requirements include emergency response assistance plans for crude oil, gasoline, diesel, aviation fuel and ethanol. A task force will aim to strengthen emergency response capacity across the nation. Railway companies are also required to reduce the speeds of certain trains and implement other key operating practices.

RFS Cellulosic Requirements Gallons Statutoryy 2013 Cellulosic RFS RF 2013 Cellulosic RFS, as Established by Rulemaking Revised 2013 Cellulosic RFS, Proposed in New Rulemaking

1 billion 6 million 810,185

RINS 2013 D3 Cellulosic Biofuel 2013 D7 Cellulosic Diesel RINs Total 2013 Cellulosic RINs T

422,740 387,445 810,185

SOURCE: U.S. EPA

EPA reduces 2013 cellulosic requirement The U.S. EPA is revising the cellulosic requirement of the 2013 renewable fuel standard (RFS) to reflect actual production. On April 23, the agency published prepublication versions of a notice of proposed rulemaking and a direct final rule to reduce the 2013 cellulosic RFS requirement to 810,185 ethanol-equivalent gallons. On a percentage basis, that equates to approximately 0.0005 percent of U.S. transportation fuel.

The EPA’s action stemmed from petitions filed last year by the American Fuel and Petrochemicals Manufacturers

and the American Petroleum Institute requesting reconsideration of the cellulosic requirements. Those petitions cited a reduced cellulosic fuel production forecast made by a cellulosic biofuel producer after the 2013 RFS rulemaking process was complete.

The direct final rule will become effective 60 days after its official publication in the Federal Register unless the EPA receives relevant adverse comment within 30 days, in which case it will proceed with the parallel proposed rule.

WE SEE BIOFUELS. In our dreams. Awak Awake. ake. All the time time.. Ever Everywher ywhere. ywhere.

We see how they’re made, how they can benefit your facility and the promise they hold for the future. We have our finger on the pulse of the industry industr and where it’s headed. Trust rust Burns & McDonnell to see you through the biorefining process.

Ron Jones Principal 314-682-1571 ronjones@burnsmcd.com

Engineering, Architecture, Construction, Environmental and Consulting Solutions

DISTILLED

Canadian company pursues hemp-based ethanol production Alberta-based Syngar Technologies Inc. has announced two joint venture projects that aim to help make hemp-based cellulosic ethanol a reality. The company had previously licensed Pulsed Low Ultra Sound Wave (PLUSWave) technology, which uses ultrasound frequencies to stimulate the fermentation growth of algae, bacterial, fungus or yeast microorganisms.

In late April, Syngar formed Cellunol Inc. with ANW Inc., a South African company with a cellulosic pretreatment technology called Oxy-Hydro Fragmentation. The second joint venture was formed in May with Discovery Minerals Ltd. That project will include pilot-scale testing of on-farm production of cellulosic ethanol using waste hemp materials as feedstock. According to Syngar, ANW and Discovery Minerals will contribute funding to establish a pilot plant where the pretreatment and PLUSWave technology will be used to convert hemp and other cellulosic materials to cellulosic ethanol.

Ethanol in Iowa, 2013

E10 E15/E20 E85 Total

Locations

Gallons

2,016 83 206 2,034

1.18 billion 5.42 million 11.15 million 1.2 billion

Pure Biofuel Gallons 118.23 million 0.81 million 8.81 million 127.85 million

SOURCE: IOWA DEPARTMENT OF REVENUE

Sales of ethanol blends increase in Iowa The Iowa Department of Revenue’s 2013 Retailers Motor Fuel Gallons Annual Report shows the state experienced significant growth in the use of higher-level ethanol blends last year. According to information released by the Iowa Renewable Fuels Association, the report shows the sale of ethanol blends ranging from E15 to E69 increased by 158 percent, reaching 5.4 million gallons sold. Sales of E85 also hit an alltime high in the state, with more than 11.1 million gallons sold. That is an 18 percent increase over 2012 E85 sales.

“Across the board increases in the use of ethanol blends above E10 prove, despite the petroleum industry’s well-funded scare campaign, consumers prefer low-cost, homegrown ethanol,” said IRFA Executive Director Monte Shaw. “The EPA’s proposal to slash 2014 targets under the Renewable Fuel Standard would be detrimental to the great progress we’ve made improving air quality and increasing our energy security through domestically produced, less expensive ethanol and biodiesel blends.”

Your plant needs are unique...your process treatment options should be just as unique!

West Agro Executive Brands releases DeLasan CMT™ a patent pending process treatment used to control bacteria during fermentation. In addition to micro-biological control, benefits of a DeLasan CMT program can include: • Improved ethanol production: DeLasan CMT helps control lactic and acetic bacteria and reduces glycerol production. The result can be higher ethanol production per bushel of corn.

• Alternative to antibiotic treatments: DeLasan CMT controls bacteria during the initial fill stage of the fermenter. As a result, no other products are needed to control bacteria.

• Cost effective: Because DeLasan CMT is effective at very low dosage rates, the program cost is normally less than the cost of antibiotic treatments.

• Benefits distillers grains: DeLasan CMT has a short half life and breaks down into food ingredients. Unlike other products used to control bacteria, DeLasan CMT contains no non-food components that can carry through into distiller grains or other food by-products.

• Easy to feed and test for: DeLasan CMT is added directly into the corn mash. No premixing is required. The control test is a modified total chlorine test already in common use.

• Complete consumption: Unlike some treatment products, DeLasan CMT is completely consumed in the fermenter. It contributes no sodium, chloride, or sulfate to the backset. It does not harm yeast when used at recommended levels.

• GRAS status: DeLasan CMT is “Generally Recognized As Safe” for distillers grains.

• No need to rotate antibiotics: Bacteria do not develop resistance to DeLasan CMT. As a result, bacteria resistance concerns are reduced.

Contact your Executive Brands West Agro representative for more information.

WestAgro Executive Brands a division of DeLaval Inc. 11100 North Congress Avenue Kansas City, MO 64153-1296 Phone: 816-891-1530 Fax: 816-891-1505 www.WestAgroExecutiveBrands.com

DISTILLED

Byogy, Avianca Brasil partner to advance alcohol-to-jet fuel

UK Biofuel Consumption (in ktoe)

California-based biofuel company Byogy Renewables Inc. and the its airline partner Avianca Brasil have launched an initiative to support advanced testing to accelerate ASTM approval for Byogy alcohol-to-jet (ATJ).

"Our goal…is to first support the approval of the ATJ suite of process technologies in accordance with current regulations that limit blending to 50 percent, and then, after gaining appropriate experience testing data, work with the ASTM stakeholders to study the potential use of higher blend ratios that will in turn drive the highest level of carbon reduction possible of any renewable fuel," said Kevin Weiss, CEO of Byogy.

Byogy’s technology leverages the existing global feedstock of ethanol and is not dependent on a novel biological organism. Rather, the company employs a petrochemical process to convert ethanol into biobased jet or gasoline.

2005 2006 2007 2008 2009

Ethanol

Biodiesel

33 169 347 886 1,044

85 95 153 206 320

2010 2011 2012 2013

Ethanol

Biodiesel

1045 925 631 766

631 652 774 819

SOURCE: RENEWABLE ENERGY ASSOCIATION

Report highlights economic impact in UK The U.K.-based Renewable Energy Association has published a report that breaks down the economic impact of the biofuels industry and other renewable energy sectors on the U.K.’s economy. According to the report, the liquid biofuels sector employed 3,510 people in the U.S. during 2012-'13, with approximately 200 companies taking part in the liquid biofuel supply chain. The sector has an economic impact of £530 million ($888.86 million) during that time.

Jobs in the sector include those in design and development, manufacturing, construction and

installation, feedstock production, operations and maintenance, and distribution. Overall, the report estimates the U.K. could consume 4.205 million tons of oil equivalent (toe) of liquid biofuels by 2020, up from an estimated 2.153 million toe in 2014.

According to the REA, biofuel consumption increased by an average of 3.8 percent per year from 2009 through 2013. However, without an improved policy framework, it seems unlikely the U.K.’s legally binding 2020 sub-target of 10 percent renewable transport will be achieved.

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A FISH IN HAND: Prairie AquaTech currently does testing with yellow perch in 30 tanks of 30 gallons each.

PHOTO: JAY FISHBACK

32 | Ethanol Producer Magazine | JULY 2014

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Fishing For Profit

Distillers grains and other new coproducts of ethanol production show potential in replacing fishmeal, the holy grail ingredient in aquaculture feed rations.

By Holly Jessen

Ethanol producers looking for the next big market for distillers grains may want to seriously consider aquaculture feed. “For a variety of reasons, we’re

just at beginning phases of seeing the potential for a significant amount of DDGS use in fish diets around the world,” says distillers grains expert Jerry Shurson, a professor at the University of Minnesota.

Fishmeal, part of the aquaculture ration, is expensive and growing more so all the time. There are also questions about the longterm sustainability of harvesting wild-caught marine fish from the ocean. “It has put a lot of pressure on the aquaculture industry, globally, to look for alternative protein sources to replace some, if not all the fishmeal,” he says.

JULY 2014 | Ethanol Producer Magazine | 33

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That, plus rapid growth in the farmedfish industry, has opened up a huge potential for plant-based protein substitutes, including distillers grains. Testing has shown that ethanol coproducts contain very attractive nutritional components for fish.

“It’s one of the little-known stories about future markets that really have not been developed to its fullest extent,” Shurson says, adding that he expects to see more as ethanol plants evolve into true biorefineries. In fact, Badger State Ethanol LLC is currently using Fluid Quip Inc. technology to break into this and other markets. “They are producing a very high-quality, highprotein, high-amino acid coproduct, which has features that are very, very attractive for aquaculture feed, as well as for pig diets and poultry,” he says.

In Belgium, BioWanze SA, a 300,000 cubic meter (80 MMgy) wheat-to-ethanol plant produces 55,000 metric tons a year of gluten. Besides going into the pet food and baked goods market, the company’s pelletized gluten is a popular replacement for imported fishmeal or high protein soy concentrate, says André Tonneaux, director of BioWanze SA. These two ethanol producers aren’t the only ones with their eye on the fish food prize. In South Dakota, Prairie AquaTech is perfecting a microbial process to con-

vert soybean meal or distillers grains into a high-protein, low-fiber aquaculture feed.

It involves inoculating the plant-based feed ingredient with a microbe that consumes carbohydrates in a process similar to fermentation, says Jason Bootsma, the company’s chief technology officer.

Although the company has been working with soybean meal longer, researchers have already discovered that distillers grains has a few advantages. Besides a lower price, distillers grains has fewer anti-nutritional properties than soy, he says. On the other hand, soy starts out with a higher protein level than distillers grains, a key factor in identifying an ideal fishmeal replacement.

Fishmeal, which runs about $2,000 a ton, is 65 percent protein. Prairie AquaTech has successfully used its process to produce a soybean meal feed that can replace 100 percent of fishmeal in aquaculture ration.

“We haven’t quite got to that level yet with distillers grains,” he says. “We’re still working on that.”

Investigating The Possibilities

Shurson was part of a study of distillers grains used in aquaculture diet that was conducted in Norway, which compared the effects of including distillers grains without

NEW MARKETS distillers corn oil separation and reduced-oil distillers grains. Although it was assumed low-oil distillers grains would be better for aquaculture feed due to a higher protein content, that didnâ&#x20AC;&#x2122;t turn out to be correct, he says. Both types of distillers grains worked well in aquaculture diets and show potential but reduced-oil distillers grains was slightly less attractive.

In this study, rainbow trout were fed a diet in which distillers grains were used as a partial replacement for other plant based proteins, such as canola meal, sunflower meal and field peas. The fish that were fed high-oil distillers grains had better feed conversion, weight gain and other benefits.

Those that got low-oil but higher protein distillers grains actually experienced lower protein digestibility but better phosphorus retention and digestibility.

Peter Williams, the biofuels business development manager for Associated British Agriculture, spoke last year at the International Fuel Ethanol Workshop & Expo about a potential new ethanol coproduct

A STEP UP: Jason Bootsma of Prairie AquaTech stands in the companyâ&#x20AC;&#x2122;s current testing facility. A new building is currently under construction where the company plans to produce commercial-scale volumes of fishmeal replacement from processed soybean meal and distillers grains.

PHOTO: JAY FISHBACK

JULY 2014 | Ethanol Producer Magazine | 35

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PHOTO: BIOWANZE SA

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FISH FEED OPTIONS: BioWanze SA, a European ethanol plant produces pelletized gluten, left, while Fluid Quip’s technology offers ethanol producers the option to produce a high protein stream from whole stillage.

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he calls yeast protein concentrate (YPC,) which is a good replacement for fishmeal in aquaculture diets. In fish feeding trials YPC was used at up to a 15 percent inclusion rate with good results. “Not only was it able to replace the fish meal, but we got some very important increase in growth when we put this product in,” he says, adding that yeast is a known immune stimulant that contains valuable components such as nucleotides.

William’s work in this area got started when he wondered how much yeast went through the ethanol production process.

No one could answer that question. “We found it’s a lot more than was first realized,” he says, adding that the amount of yeast increases during fermentation. Associated British Agriculture is in the process of patenting the technology to recover yeast and working to license it with ethanol producers in the U.S. and overseas.

Dennis Evers, chief technology officer for Meridian Biotech, will speak on this topic at this year’s FEW. The company has developed a process to grow bacterial biomass on waste products, such as ethanol

NEW MARKETS

stillage. The biomass, a single-cell protein, doubles in volume rapidly and can generate about 10 tons a day. An ethanol plant could potentially go from a 12-cent per gallon profit on the ethanol it produces to a 28-cent per gallon profit, just by adding production of this new coproduct, he says.

Another benefit is that the methane generated during the process can be captured to supply all the facilities energy needs.

Testing conducted in Australia on prawns revealed phenomenal results, including a faster growth rate. “They liked it so much they were virtually jumping out of the water,” he says. “They just loved the stuff.”

Meridian Biotech is currently working on joint ventures with U.S. ethanol producers, including companies that own multiple ethanol plants. Evers has had 40 years to work the teething problems out of the process, he says, which is ultimately very simple. “This is what people can’t understand.

It has so many benefits, yet it is so simple.

In fact, it’s too bloody simple, actually,” he says with a laugh. “I should make it look a bit more complicated.”

in the Asian aquaculture market, he says. “It is still small-niche usage area, compared to bigger poultry and swine markets, but offers strong growth potential,” he says.

Michael Franko, technical projects manager for Fluid Quip, confirms it’s a market with huge opportunity. “Everybody wants to be in aqua,” he says. Besides the technology in operation at Badger State since 2009, Fluid Quip is working with two international plant projects, currently in the detailed engineering phase, which aim to produce the same high-protein coproduct.

In addition, in early May, the company was issued a notice of allowance for its patent application.

Producing a new ethanol coproduct like the ones described by Evers, Franko and Williams does change the composition of the distillers grains produced. Spe-

cifically, the Fluid Quip process results in about 3 to 4 fewer pounds per bushel of distillers grains, on a dry basis, Franko says.

However, besides a second, high-value coproduct, the process can also result in more distillers corn oil. And, it’s tunable, with the ethanol producer having the ability to adjust the concentration percentages of the yeast, gluten or protein, which can go to concentrations as high as 55 percent.

Author: Holly Jessen Managing Editor, Ethanol Producer Magazine hjessen@bbiinternational.com 701-738-4946

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Adel Yusupov, regional director for Southeast Asia for the U.S. Grains Council says worldwide aquaculture feed production is estimated at 70 million metric tons yearly. Seventy percent of that is produced in China, 18 percent in Southeast Asia and 6 percent in India. “Globally, wild catch has been trending down, while aquafarming is on uptrend,” he says. “It is not a matter of if, but when, that the aquaculture industry will have to move feeding from fish-based (fishmeal, trash fish) toward plant-based protein feed ingredients such as soybean meal, distillers grains and corn gluten meal.”

USGC has done some feeding trial work, promoting distillers grains and corn gluten meal in aquaculture diets. There is a potential market for U.S. ethanol producers

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REGULATION

SOURCE: 2013 DATA FROM THE RENEWABLE FUELS ASSOCIATION

38 | Ethanol Producer Magazine | JULY 2014

REGULATION

Beyond Feed Proposed FDA regulations raise compliance questions among ethanol producers.

By Susanne Retka Schill

Under the Food Safety Modernization Act, the ethanol industry is facing another set of recordkeeping requirements, new good manufacturing practices (GMP) and a new agency looking over its shoulder, the Food and Drug Administration. Exactly what those FSMA rules will

require isn’t known yet—the deadline for the final rule to be published isn’t until next summer, and it appears most in the industry will have a couple of years to comply once they are promulgated.

Though compliance with FSMA is not imminent, many are wondering just how much change lies ahead for distillers grains producers. The ethanol industry will get a second look at the proposed rules later this summer, when revisions to several sections are reopened for comment. The two of most interest to the ethanol industry include GMPs for the production of animal food and preventive controls. Long in place for human food manufacturing, GMPs will be a new requirement for the animal feed industry.

Hazard analysis and preventive controls will be new to both human and animal food manufacturers.

The first reworking of food safety rules in many years, FSMA reflects the growing need to move away from reaction to prevention, says Daniel McChesney, director of the office of surveillance and compliance at the FDA Center for Veterinary Medicine. The change in focus found in the FSMA legislation was supported by consumers, Congress, industry and the agency, he says. “It was driven by a lot of things, one, the globalization of the food and feed supply.”

JULY 2014 | Ethanol Producer Magazine | 39

REGULATION

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McChesney says a 2007 incident played a big role in the adoption of FSMA. â&#x20AC;&#x153;There was concern over food safety and people were talking about moving towards prevention,â&#x20AC;? McChesney recalls. â&#x20AC;&#x153;Then we ended up with melamine in pet food and FDA got 18,000 consumer calls about sick and dying pets.â&#x20AC;? It was the most calls the agency had gotten ever, or since. â&#x20AC;&#x153;Pet food was the snowball that started rolling down the mountainside. Things really picked up quickly after that and moved toward prevention.â&#x20AC;? FDAâ&#x20AC;&#x2122;s role in ensuring food safety has been expanded and within FDA, the Center for Veterinary Medicine is expanding its role, from overseeing the manufacturing of medicated feeds, to ensuring GMPs and preventive controls are in place among feed manufacturers and suppliers of feed ingredients.

The timeline between the act becoming law in 2011 and the deadline for publication of proposed rules was tight. â&#x20AC;&#x153;On the animal feed GMP side,â&#x20AC;? McChesney says, â&#x20AC;&#x153;we looked at the time frame, we looked at writing GMPs and we said weâ&#x20AC;&#x2122;re going to take the human GMPs, modify them slightly, put that out as our proposal and ask industry, are these practical?â&#x20AC;?

Industry Reaction

The feed industry found multiple problems. â&#x20AC;&#x153;From an animal feed standpoint, we do not think that good manufacturing requirements need to be as stringent for animal feed as they need to for human food,â&#x20AC;? says David Fairfield, vice president, feed services for the National Grain and Feed Association. There are obvious reasons, he points out, when, where and how animals are raised is compared to how humans live. â&#x20AC;&#x153;The idea that animal feed needs to be produced under the same hygienic standards and conditions as human food is not realistic,â&#x20AC;? he says. â&#x20AC;&#x153;We commented extensively to FDA.â&#x20AC;?

Indeed, NGFA submitted more than 100 pages of comments. â&#x20AC;&#x153;Our view is that the preventive control requirements are way too onerous as well,â&#x20AC;? he adds. While he expects modifications to the language, he does not expect the recent calls for an exemption or special treatment of spent brewers grains in the regulation to be extended to the fuel ethanol industryâ&#x20AC;&#x2122;s coproduct.

McChesney confirms that, explaining that the issue is broader than just spent brewers grains. â&#x20AC;&#x153;When we put out new

REGULATION

Proposed Good Manufacturing Practices • Personnel – Follow good hygiene practices.

– Protect food from contamination from personal effects.

• Plant and Grounds – Includes proper cleaning, maintenance and pest control.

• Sanitary Operations – Such as the plant's water supply, plumbing, and toilet and hand-washing facilities.

• Processes and Controls – Following adequate sanitation principles.

– Properly labeling ingredients and finished animal food.

– Ensuring the safety of raw materials.

– Preventing contamination of animal food during processing.

• Equipment and Utensils – Includes the cleaning and maintenance of such items and protecting animal food from contamination.

• Warehousing and Distribution – Includes protecting animal food against contamination and deterioration. language, it will be addressing all the human food manufacturing coproducts going to animal feed, and not just the spent grains, though admittedly, the spent grains brewers were the most vocal.” Though the end product, distillers grains, is the same, the two industries are in very different categories, he says.

“The real difference is that the brewers and human distillers are working under the human food GMPs, starting with food grade material, using food grade vessels.” The fuel ethanol process, on the other hand, is industrial, without similar requirements in place.

He adds that in reviewing the 2,000-some comments made on the rule, there was a common theme. “Basically, all said the GMPs were too prescriptive as written and they needed to be modified or changed to be more appropriate for animal feed. We’ve taken that to heart and we’re doing that.” The

revisions should be reopened for comment later this summer, he adds.

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Although the ethanol industry isn’t relishing the thought of a new set of regulatory requirements, many are thinking that it’s too far off to worry about now. However, industry veterans encourage the industry to start planning early.

“The guiding principle of providing a safe product is good,” says Harold Tilstra, manager of tech support for ingredients merchandising business at Purina Animal Nutrition. “And, the public deserves to know there are processes in place that help with that.”

While he is sympathetic with the reluctance to embrace more regulation, he says the ethanol industry needs to avoid creating a perception with the public that it doesn’t care about its product

JULY 2014 | Ethanol Producer Magazine | 41

REGULATION

being safe. â&#x20AC;&#x153;The track record on distillers grains safety is very good,â&#x20AC;? he adds. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m hard pressed to think of any situation related to food safety attributable to the use of ethanol coproducts.â&#x20AC;?

Randy Ives, director of ethanol services at Gavilon Group LLC, suggests the first challenge for the ethanol industry will be a change in attitude. Working in the ethanol industry since 1994, he remembers when distillers grains was considered a low-value

byproduct that got little attention. That has evolved, he says, â&#x20AC;&#x153;to where we recognize consistent quality in the coproducts means better returns to investors, less issues with customers. It flows better, the productâ&#x20AC;&#x2122;s not burnt and we have less rejected loads. We started paying attention to all the details.â&#x20AC;?

The change in attitude coming with FSMA is highlighted in the use of the word â&#x20AC;&#x153;foodâ&#x20AC;? instead of â&#x20AC;&#x153;feed,â&#x20AC;? Ives points out. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s the difference from 20 years ago. Everything

was feed then, but weâ&#x20AC;&#x2122;re producing a food ingredient. We are part of the food chain.â&#x20AC;?

FSMA will be new for everybody in the feed industry, not just ethanol producers, he continues.

Some ethanol producers are getting a head start as they prepare for another set of export requirements. About 75 ethanol plants have indicated they will comply with the Chinese Decree 118, Ives reports, which is almost identical to FSMA (but different from the registration issue discussed in the page 56 contribution from U.S. Grains Council in this issue).

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Renewable Fuels | Ethanol Group 42 | Ethanol Producer Magazine | JULY 2014

Helping ethanol producers meet the China export requirements, Iowa-based Rick Brehm draws upon a couple of decades of experience in the feed industry as well as time managing an ethanol plant. He suggests the biggest changes coming to meet both the China requirements and FSMA will be in wet and dry distillers storage. â&#x20AC;&#x153;I think we will find weâ&#x20AC;&#x2122;re going to have to either not allow the large overhead doors to be open all the time or weâ&#x20AC;&#x2122;re going to have to find a way to prevent the birds and insects from getting in.â&#x20AC;? Hanging strips of plastic or sliding screen doors with sensors that automatically open and close them, much like doors on a grocery store, are possible solutions.

The handling of wet cake may be the most challenging, he adds. â&#x20AC;&#x153;A lot of the wet feed pads are more open than what dried distillers grains storage buildings are,â&#x20AC;? he says, adding that he suspects there will be requirements to rotate inventory and clean the pad.

Avoiding possible contamination from birds and other wild animal droppingsâ&#x20AC;&#x201D;a potential source of salmonella or other contaminantsâ&#x20AC;&#x201D;is the goal.

Another situation heâ&#x20AC;&#x2122;s seen that will need to be evaluated is the use of the grains building for other storage. â&#x20AC;&#x153;I think people will have the ability to store metal or machine parts, but I donâ&#x20AC;&#x2122;t think theyâ&#x20AC;&#x2122;ll be able to store any liquid in containers that could

REGULATION

potentially leak or be torn and potentially contaminate distillers grain.”

Bob Miller, another consultant with many years in the beverage alcohol industry and four years as an ethanol plant manager, has also visited with ethanol producers about FSMA compliance. “What is clear is that much remains to be done and waiting for absolute clarity is not an option,” he says. One of his concerns is the handling of antibiotics to treat infections in the fermenters. “If the ethanol plant is going to continue to use antibiotics, the plan must address the possibility of drug residues occurring in distillers grains or any other coproduct, such as corn oil, that is sold or could be sold as an animal feed,” he says.

While many plants are moving away from routine use of antibiotics, “I don’t foresee that in the near term antibiotics are going away,” Brehm concurs. “But compared to the feed industry, there is very little recordkeeping of antibiotics, and that may change.” He describes the inventory controls in place in medicated feed manufacturing, where at the end of a shift the medications are weighed and the inventory balanced within a tenth or quarter pound.

“You didn’t want to find that somebody accidently poured a whole bag of something in when they saw a one on the recipe and it meant one pound,” Brehm explains. “Taking inventory at the end of the day, you could stop shipment on a product until you figured out exactly what had happened.”

Best management practices and hazard analysis are not new to the ethanol industry.

These tools have long been used in safety programs, along with employee training and recordkeeping requirements to demonstrate compliance. Standard operating procedures are commonly used as part of process management, and many BMPs regarding distillers grains are already widely used. Sulfur related problems in cattle, for example, were traced back to sulfur from process additives getting concentrated in the distillers grains.

The industry quickly learned what needed

to be done to prevent reoccurrences. Aflatoxins are another known hazard and the industry has figured out how to put preventive controls in place to avoid concentrated levels in the coproduct.

As distillers grains is more widely used at higher inclusion rates, new issues may emerge, suggests the FDA’s McChesney.

Something that wasn’t an issue at a 10 percent inclusion rate may present problems when fed at 50 or 60 percent rates, he says.

“It’s that sort of problem the rule is trying to prevent. You want to be preventive, you don’t want to find out after you’ve had a bunch of sick animals.”

Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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JULY 2014 | Ethanol Producer Magazine | 43

VALUE-ADDED

GOING GREEN: A new container for SweetProâ&#x20AC;&#x2122;s distillers grains-based feed supplements sits on top of a product in the traditional plastic container. The new containers contain resins produced from processed distillers grains.

PHOTO: LAUREL BIOCOMPOSITE LLC

NEW DIGS: Nebraska-based Laurel BioComposite LLC moved into a new manufacturing facility in the fall of last year.

DINNER BELL: SweetPro manufactures feed supplements for beef and dairy cattle as well as bison, sheep, goats and specialty animals, such as elk or llamas.

PHOTO: LAUREL BIOCOMPOSITE LLC

PHOTOS: SWEETPRO

44 | Ethanol Producer Magazine | JULY 2014

VALUE-ADDED

Complementary Strategies For Success Someday, cattle may be able to have distillers grains and eat the container too, thanks to a plastics ingredient manufacturer and feed company.

By Chris Hanson

The growing use of dried distillers grains as a feed additive is a subject producers hear about on a regular basis. But what about producing plastic feed containers using distillers grains-

based resin enhancers, perhaps even making the whole container edible in the future? Enter SweetPro and Laurel BioComposite LLC, who are developing ways to make it happen.

A 20-year veteran of the feed industry, SweetPro has been evolving toward incorporating more biodegradable materials into the containers for its distillers grains feed supplement products. “We’re down to a point now where two-thirds of our container is biodegradable, but the bottom third was not,” explains Bob Thornberg, president of SweetPro. “So we had a very significant interest in things that will move us in that direction to minimize plastic when we can.”

Laurel BioComposite LLC made the first move around last fall and contacted SweetPro with a proposal. The Laurel, Neb., company produces trademarked Bio-Res powder and pellets from distillers grains, which can be blended with resins for plastic production, replacing traditional petroleum-based resins.

“When Laurel BioComposite called and said that they have something based on distillers grains and can inject it into plastic, I thought, ‘Good grief, this is almost too good,’” Thornberg recalls. “We’re a distillers grains-based company, if you will. If there are things we can use for biodegradability and distiller grains

JULY 2014 | Ethanol Producer Magazine | 45

VALUE-ADDED

in our packaging, that’s even better. When they called with the concept, I was ready.”

The first prototype Laurel BioComposite created for SweetPro was remarkable, Thronberg says. “We’ve done wheat-based and corn-based biodegradable components and other containers have been too brittle or had limitations with biodegradability,” he says. “When we tested it in sub-zero weather—we pounded on it,

jumped on it—it held up every bit as well as the other basis.”

Price was a key concern, says Tim Bearnes, CEO of Laurel BioComposite.

“If you look at using bio-resins to replace traditional resins, the challenges are that you have to make a product that is compatible with traditional plastics and maintain acceptable properties and processes as well, and you have to do that at a fair and

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reasonable cost point,” he says. “So we went into the whole project understanding that people are very interested in renewable and sustainable materials, but, in general, consumers are not willing to pay more for that sustainability piece.”

The resulting product was biodegradable and durable and comes with a potentially attractive price. “We were able to do it with no cost implications to the producer,” Thornberg says.

By late April, roughly a semi-trailer load of the containers was waiting at one of SweetPro’s distributors, Montana- based, Agri-Best Feeds, for some initial trial runs.

“I would think we would have some pretty good feedback within a couple months or less,” Thornberg says. “But we’re not expecting much more than confirmation on what we have seen so far.”

The material has one characteristic that companies will keep a close eye on in the trial run. “There is a bit of an odor issue that we want to see if it is off-putting for cattle and if it influences their intake,” he says. If the odor does not affect intake, which it is not expected to, then the product will be on route to greater production, he adds. “You always want to be sure you checked everything.”

If all the field testing comes back positive and there are no unforeseen challenges, the distillers grain bins could become available on the mass market relatively soon. Perhaps even by this winter but certainly within a calendar year, Thornberg says.

“We’ve done a lot of work on developing and testing and we have pretty good in-house capabilities for product development, Bearnes adds, “so it’s not like they are taking a huge amount of risk to try it.”

Author: Chris Hanson Staff Writer, Ethanol Producer Magazine chanson@bbiinternational.com 701-738-4970

Q&A

Doctor DDGS Leading swine nutritionist, University of Minnesota professor Jerry Shurson, discusses low-oil DDGS and growth performance on pigs.

INTERVIEW BY RON KOTRBA

With ethanol plants extracting oil from DDGS, the question of how this affects feeding performance becomes paramount to the livestock and poultry industries.

University of Minnesota professor Jerry Shurson talks with Ethanol Producer Magazine about his most recent study on the growth performance from feeding reduced-oil DDGS to growing-finishing pigs, providing much-needed answers to the pork industry.

How does metabolizable energy content, specifically in swine diets, correlate with growth, carcass quality and pork fat quality?

Metabolizable energy is the most expensive nutritional component in swine diets and represents about 70 to 80 percent of total diet cost. Pigs have daily requirements for calories (i.e., metabolizable energy or ME) that must be met for them to grow at their genetic potential and maximize the amount of muscle (pork) in the carcass at harvest. Inadequate metabolizable energy consumption causes pigs to grow slower and can reduce the percentage of lean in the carcass. Excess metabolizable energy consumption beyond that required for lean growth can lead to fatter carcasses.

The main sources of calories in feed are oil, carbohydrates and excess protein, but these are not 100 percent digestible because of their various chemical forms and the pig’s digestive processes and abilities to use them. When ingredients high in polyunsaturated fatty acids, such as distillers corn oil and DDGS, are fed, some of these fatty acids are not converted to calories, but rather are deposited in fat tissues in the body. Linoleic acid is the predominant long-chain fatty acid in corn oil that is not well-digested by the pig, and is deposited in backfat and belly fat. Linoleic acid has a very

48 | Ethanol Producer Magazine | JULY 2014

low melting point and is the primary reason that feeding diets high in corn oil causes soft pork fat.

Does less oil in DDGS mean less ME content?

Not necessarily. Most people—including those of us doing research on this topic— reasonably assumed that removing some of the oil from DDGS would reduce the metabolizable energy content, since oil is rich in calories and taking calories out of DDGS should lead to less metabolizable energy content. However, after conducting several experiments to determine the ME content of DDGS sources with variable oil content in swine and poultry, we’ve learned that this is often not the case. From our research, we have found that some reduced-oil (e.g., 6 percent oil) DDGS sources can have the same amount of metabolizable energy as sources that contain 10 to 13 percent oil when fed to pigs and poultry. In fact, the correlation between DDGS oil content and metabolizable energy content is very low (r = 0.11 to 0.32).

Why is crude fat content a poor predictor of ME content?

First, we know that from other experiments that we have conducted, fiber digestibility is surprisingly quite variable among DDGS sources, ranging from 23 to 55 percent. Although fiber is less digestible than other carbohydrates like starch, it can be a significant contributor of calories to the diet. Therefore, it is possible that a source of DDGS with relatively high fiber digestibility could contribute significant amounts of metabolizable energy calories in a reducedoil DDGS source to partially make up the difference of the calories lost due to partial oil extraction. Secondly, other research

studies with pigs have shown that only about 50 percent of the oil present in DDGS is digestible, compared to extracted distillers corn oil, which is over 90 percent digestible.

Therefore, even those we can chemically measure the oil content in DDGS, if it is only 50 percent digestible, much of what is present is not serving as a source of calories or contributing to the overall metabolizable energy content of reduced-oil DDGS.

What can you tell me about your most recent study?

It was conducted at the University of Minnesota West Central Research and Outreach Center in Morris, Minn., and involved 432 pigs with initial body weight of 57 pounds. They were fed experimental diets for about 90 days, and were harvested at 264 pounds. We used four dietary treatments in a four-phase feeding program. Dietary treatments consisted of a control cornsoybean meal diet with no DDGS; and three DDGS dietary treatments consisting of similar amounts of corn and soybean meal containing 40 percent low (6 percent oil), medium (10 percent oil), or high (14 percent oil) DDGS sources. We measured body weight and feed disappearance every two weeks during the experiment and calculated average daily gain, average daily feed intake, and gain efficiency during each two-week period and overall.

Prior to harvest, ultrasound measurements of backfat and loin muscle area were obtained on each pig, and then pigs were shipped to a commercial abattoir for harvest and collection of hot carcass weight and pork fat samples at three locations. Ultrasound and hot carcass weights were used to calculate percentage of carcass lean, and pork fat samples were used to determine the effects of dietary treatment on pork fatty acid composition.

Q&A

polyunsaturated fatty acids as provided by corn oil in DDGS, a significant portion is deposited in body fat tissue.

By reducing the oil content in DDGS, less oil is consumed by the pig, resulting in less polyunsaturated fatty acids deposited in pork carcass fat, which ultimately resulted in an improvement in pork fat quality (firmer fat).

Your findings suggest low-oil DDGS has no affect on pig growth performance and improves pork fat quality. Why is this?

Correct. Overall growth rate and feed intake was not different among DDGS dietary treatments using DDGS sources containing 6, 10, or 14 percent oil. Furthermore, gain efficiency was not different between pigs fed the 10 percent and 14 percent oil DDGS diets but was slightly reduced for pigs fed the 6 percent oil DDGS diets. This means that our “best” prediction equations are accurate for estimating ME content of DDGS with oil content greater than 6 percent, but they slightly overestimate ME content of DDGS with 6 percent or less oil.

This gives us confidence that we can accurately estimate ME content for many of the high and moderate oil DDGS sources in the ethanol industry. The slight reduction in gain efficiency when feeding the 6 percent oil DDGS source is not surprising in retrospect, because all of the DDGS ME prediction equations previously developed used DDGS sources that contained 6 to 14 percent oil, which was what was being produced in the ethanol industry at the time these studies were conducted. We interpret this to mean that prediction equations are most accurate for the range in nutrient content from which they were derived. Now that more ethanol plants are extracting more oil, these equations are becoming less relevant and we will need to conduct more research to develop new equations to improve our accuracy in ME estimation when evaluating DDGS sources that contain less than 6 percent oil.

We expected an improvement in pork fat quality when feeding reduced-oil DDGS sources. When you feed a diet high in

For pig development, what is the optimal oil percentage for low-oil DDGS? There is no optimal oil content for DDGS. We’ve consistently shown a poor direct relationship between oil content of DDGS and ME content.

For ethanol producers who can hit this oil percentage mark, should their product command a better price in the swine feed market? Why or why not?

We formulate swine and poultry diets on a ME or net energy basis, as well as on a digestible amino acid and phosphorus basis— not on a “profat” or crude protein and crude fat basis, which are the traditional measures used in the commodity marketing world. Since ME content is a primary determinant of economic value of a DDGS source in a swine diet, those with a higher ME content should theoretically command a better price. From an economic point of view, our ME prediction equation could theoretically be used by DDGS marketers to establish more accurate DDGS prices based on ME content rather than profat guarantee, which is a poor descriptor of actual feeding value of DDGS sources for pigs and poultry. In addition, the ME equations can help determine which DDGS sources have higher ME value, even though purchase prices may be similar.

PHOTO: SATORI PHOTOGRAPHY

JULY 2014 | Ethanol Producer Magazine | 49

TRANSPORTATION

50 | Ethanol Producer Magazine | JULY 2014

TRANSPORTATION

Stuck

At The Station Multiple factors, including winter weather and shale oil traffic, presented logistical challenges for dried distillers grains marketers and ethanol producers early this year.

By Chris Hanson

Cars, cars everywhere, but not an engine to pull them. This is one way to describe logistical challenges facing commodity producers and marketers during the first half of the year.

The effects of prolonged rail delays are felt across the commodity board, including the ethanol and distillers grains marketing industry. â&#x20AC;&#x153;From a DDG standpoint, it has made us more vigilant about cars continuing to move as we have ever been and avoiding the assumption that cars will move or locomotives will be there once the trains are built,â&#x20AC;? says Sean Broderick, distillers grains marketing manager at CHS Inc. Before the congestion issues, Broderick expected an engine to arrive within two or three days. â&#x20AC;&#x153;For the past six months, as soon as I put that [billing] in, I have to start following up right away, because I know the delays we have had, even with the follow-ups, are going to be more than what they

JULY 2014 | Ethanol Producer Magazine | 51

TRANSPORTATION

knew it was because we couldn’t get our product to market due to the poor rail service,” Davis says.

U.S. Rail Carloads of Crude Oil vs. Ethanol 450,000 Crude Oil

400,000 350,000

Ethanol

300,000 250,000 200,000 150,000 100,000 50,000 2005 2005

2006 2006

2007 2007

2008 2008

2009 2009

2010 2010

2011 2011

2012 2012

2013 2013

CRUDE TAKEOVER: Rail shipments of ethanol have stabilized in recent years while crude oil shipments have increased nearly 1,400 percent since 2010.

SOURCE: AAR, CHART COURTESY RFA

were before. There was a time where trains waited as long as 10 days.”

The Renewable Fuels Association started getting calls about poor rail service from member companies in late December and early January. “There were some companies that just couldn’t get any pickups, and, of course, we have limited storage volumes at our ethanol plants,” says Kelly Davis, director of regulatory affairs for the

RFA. “So if things don’t run on time, ethanol doesn’t move. When ethanol doesn’t move, people don’t get paid.”

The delay pushed up prices. Between late December and early April, the RFA noticed how expensive ethanol was getting at destinations such as New York Harbor, she says, adding that gas price increases were blamed on the price of ethanol. “We felt that was disingenuous because we

Hitting The Brakes

The explanations for the delays can vary depending on the source. “We obviously had a harsh winter, and some of the railroads have pointed to that,” says Chris Bliley, director of regulatory affairs at Growth Energy. “But we continue to see declining service throughout the beginning of the year and it has really impacted supply. You see some plants idle some of their capacity, and whether that’s a backlog from winter or not, but our guys are experiencing problems getting crews out to trains and that’s the main issue.”

Harsh winter weather conditions play a large role in the congestion, especially in the Eastern U.S., where cold weather and deep snow caused delays and technical problems for the railroad companies, says Broderick. For instance, it caused issues with electrical rail switches, which leads to more manual switch operations and maintenance. “They had to have people onsite to make sure the switches were clear enough to work,” he says.

Some railroad companies claim the longer stretches of sub-zero weather

TRANSPORTATION

Average Train Speed and Dwell Time, All Class I Railroads 32 31 30 29 28

Average Dwell Time (Hours)

27 26 25

Average Train Speed (MPH)

24 23 22 21 20

3/15/2013 3/29/2013 4/12/2013 4/26/2013 5/10/2013 5/24/2013 6/7/2013 6/21/2013 7/5/2013 7/19/2013 8/2/2013 8/16/2013 8/30/2013 9/13/2013 9/27/2013 10/11/2013 10/25/2013 11/8/2013 11/22/2013 12/6/2013 12/20/2013 1/3/2014 1/17/2014 2/14/2014 2/28/2014 3/14/2014 3/28/2014

Hours (Dwell Time)/MPH (Train Speed)

caused limited work hours for rail workers. “They had their service disruption excuses, but we were very upset about it, so the RFA became uniquely involved,” Davis says. “We contacted the American Association of Railroads and testified before the Surface Transportation Board, while at the same time our members continued to work with their rail suppliers for a solution.”

Although the harsh winter climates certainly slowed rail traffic to an extent, there may be larger themes affecting service. “I know there has been some snow in some areas, but certainly not like at the beginning of the year,” says Bliley. “So I’d say it is a bigger problem than just the weather.”

As the warmer weather settles in, railroads that experienced winter issues come back to life. “I think the eastern railroads are going to be able to clear up their issues faster than the Burlington Northern, Canadian National and Canadian Pacific,” Broderick says. “Most of their issues were attributed to the cold weather. Now that’s behind us, they’re already making headway into most of the backlog they had.”

Increased traffic from North Dakota crude oil production also crowds rail traffic moving East and West, catching disdain from other commodity sectors. With crude

BIG CHANGES: Train speeds were about 12 percent slower than normal in late February. Dwell times jumped 40 percent in late December and remained about 25 percent above normal through the first quarter.

SOURCE: AAR, CHART COURTESY RFA

oil moving out and oil drilling resources, such as frack sand, moving in, it has caused a bit of congestion, Broderick explains, slowing down trains trying to move through the Dakotas and Minnesota.

“At a certain point, Amtrack complained, coal was complaining, grain trains weren’t moving,” Davis says. “We had a

bumper harvest, and if you can’t move grain, you can’t get paid. If it’s a commodity, you can miss the market, so to speak.

So all the other commodities weren’t moving, but guess what was moving? Oil out of the Bakken.”

Another source of rail congestion lies among the rail yards of Chicago, one of

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TRANSPORTATION

the biggest interchanges between western and eastern railroads, Broderick says.

At this interchange, trains bottleneck and slow movement to eastern markets and ports.

Rail maintenance schedules, especially with the western railroad lines, has the potential to continue rail delays well into warmer seasons. Railroad companies, such as Burlington Northern Sante Fe, use the opportunity to complete its maintenance-

of-way programs to upgrade and maintain its systems. â&#x20AC;&#x153;Once we get to warmer weather, where you would ordinarily think [BNSF] might catch up since the cold isnâ&#x20AC;&#x2122;t causing them issues anymore, they are sort of in a type of road construction season,â&#x20AC;?

Broderick says. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s work they do in the summer, at a time you normally expect to make headway. Our expectation is whatever headway they do make will be slowed by these projects.â&#x20AC;?

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54 | Ethanol Producer Magazine | JULY 2014

â&#x20AC;&#x2DC;Since pricing has rebounded, cars are now moving. Iâ&#x20AC;&#x2122;m not sure if there are any residual delays, but at the height of it, people were talking about delays lasting until summer.â&#x20AC;&#x2122; One such rail project includes a $400 million BNSF investment to maintain its rail infrastructure in North Dakota, according to an Amtrak press release. Along the routes between Grand Forks and Minot and Fargo and Grand Forks, BNSF will install new turnouts, high-speed surfacing, ballast cleaning, and replace ties, rail relays and signal upgrades.

Working Around The Rails

As railcars sit waiting for an engine to show, distillers grains producers and marketers eye other methods to get their product out. Some plants with the ability to sell into the local markets are certainly taking advantage of the opportunity, Bliley says.

But thatâ&#x20AC;&#x2122;s not always possible. â&#x20AC;&#x153;We really rely on the rail service and, unfortunately, some of these plants had to live with the delays.â&#x20AC;?

Others went to moving more product via truck. â&#x20AC;&#x153;Ethanol plants were doing all kinds of different things to get around delays,â&#x20AC;? Davis says, adding that different plants have different strategies. â&#x20AC;&#x153;When roughly 70 percent of your product runs by rail, moving by truck increases your costs.â&#x20AC;?

There was a distinct spread between netbacks to plants moving product by the rail market and those forced to sell into the truck market, Broderick says. â&#x20AC;&#x153;If youâ&#x20AC;&#x2122;re a guy thatâ&#x20AC;&#x2122;s selling all you can in rail, and suddenly your railcars arenâ&#x20AC;&#x2122;t coming back and youâ&#x20AC;&#x2122;re making money grinding corn and making ethanol, youâ&#x20AC;&#x2122;re going to move

TRANSPORTATION the DDG at a price you probably wouldn’t ordinarily take,” he says. “But you’re still making money doing the whole process.

It’s worth it for you to take a discount in a truck market and move it at a price lower than you’d like if you can keep the plant running and make up for it on the net dollars from making ethanol.”

For facilities located near river access, specifically around the Mississippi and Illinois Rivers, shipping distillers grains via barge may provide a seasonal option during warmer weather. “If the Gulf prices are such that you can pay a little more freight to load onto the Illinois than the Mississippi, then obviously you will do it.

You’ll just have to figure out your best dollar value,” Broderick says. “In the winter, you don’t have the option of loading onto the Mississippi, so you’ll go over to the Illinois River and run down to the south in St. Louis, or you don’t go to the river.”

at Amtrak as part of a May announcement. “BNSF needs to speed repairs and upgrades in order to return the Empire Builder to its previous reliability as fast as possible. We fully expect this work to be done by the end of September at the latest.”

Individual producers can also voice their concerns to legislators and railroad service providers. “This is certainly something being debated about in Washington,

D.C.,” Bliley says. “You saw the Surface Transportation Board hold a hearing on it, you see some of the discussion in Congress. So I would certainly voice those concerns to members of Congress, and as a customer, I’d certainly talk to the railroads as well.”

Author: Chris Hanson Staff Writer: Ethanol Producer Magazine chanson@bbiinternational.com 701-738-4970

Facing It Head-On

To address the delay issues, the RFA and Growth Energy are voicing concerns to entities such as the Surface Transportation Board and American Association of Railroads. The RFA sent a letter to the AAR on April 3, pointing to the increase in railcars used to ship Bakken crude as a reason for other commodity rail delays. “We have an excellent relationship with our railroads. This just had to be called out on because of how bad the service was this past winter,” Davis says. “Since pricing has rebounded, cars are now moving. I’m not sure if there are any residual delays, but at the height of it, people were talking about delays lasting until summer.”

To take pressure off BNSF’s North Dakota maintenance project, Amtrak agreed to detour its westbound Empire Builder train through North Dakota as part of a request from BNSF. “Local community and business leaders prize the Empire Builder and see Amtrak service as an important public transportation link,” says DJ Stadtler, vice president of operations

JULY 2014 | Ethanol Producer Magazine | 55

EXPORTS

REGISTRATION EXPERTISE: Working in the USGC Beijing office, Rachel Du, right, has managed the registration for 48 of the 51 plants that have been approved to date in China. Raisy Liu provides accounting support for the registration process. Documents in the background are DDGS plant dossiers, both approved and in process.

PHOTO: U.S. GRAINS COUNCIL

The Customer Calls The Shots

Ethanol plant registration is required for DDGS exports to China.

By Tom Sleight

Every export market provides challenges, and, for a variety of reasons, agricultural products are especially vulnerable to regulatory complications.

China and DDGS are no exception. The bad news is that it takes a good deal of time and effort to comply with China’s plant

registration requirements. The good news is that there is light at the end of the tunnel, a clear pathway to approval, and an experienced guide—the U.S. Grains Council’s China office—to simplify the process and keep your registration on track.

“We’re here to help,” says Bryan Lohmar, director of the USGC’s China office. “There are many sensitive issues, both trade

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

56 | Ethanol Producer Magazine | JULY 2014

EXPORTS

and nontrade, complicating the U.S.China relationship right now, but we want our members to be compliant with the law in China and are available to help with this at any time.”

International trade gets complicated fast, but with approximately one quarter of U.S. DDGS being exported, the complications must be mastered. China began importing DDGS in 2007. By 2010 it had rocketed to the top of the list of U.S. export destinations. An anti-dumping case, now withdrawn, was one bump in the road. Recurring concerns about unapproved biotech events are another.

China’s current DDGS plant registration requirements are a third. But given China’s appetite for DDGS, and its longterm growth potential, it is a hurdle that companies wishing to export to China must overcome.

China’s registration requirements are not new, but the decision almost two years ago to begin enforcing them still came as something of a surprise. China had first announced a registration process in 2010, just as DDGS imports began to increase rapidly. The regulation, however, was not initially enforced. Instead, an antidumping suit was filed against U.S. DDGS. Thanks to a vigorous response from U.S. producers and Chinese endusers, the antidumping suit was dropped in June 2012. This was followed shortly by the announcement that the registration requirements would now be implemented, effective Jan. 1, 2013. This set off a scramble to get registered.

To date, 51 U.S. plants have successfully navigated the registration requirements, all but three of them facilitated by the council’s China office.

Eight more plants have finished their dossiers and are in the process of submitting samples for testing. Another eight are currently preparing dossiers for submission.

While the first couple of registrations were difficult—but not unusual when a new regulation is being implemented— the process is by now well-established.

It involves some work, but the process is orderly and reasonably predictable. So, if you have an eye on the China market— and who doesn’t?—come on in, the water’s fine.

The process has three major steps: • Preparation of the dossier. This first step can take anywhere from two months to more than a year.

Notarization, authentication and preparation of the GMO Safety Certificate are the most time-consuming elements.

• Submission of samples. After the dossier is completed, a plant moves to the second stage, and submits samples to China for testing.

This will require the assistance of a trader to bring the samples through customs and may take an additional month or two.

• Final approval. Finally, the dossier is submitted to the Ministry of Agriculture (MOA) and samples are sent for a recheck to a lab designated by MOA. This final stage typically takes about four months, including 20 business days for dossier approval and three months for a completed test.

Assuming all goes well, MOA will then prepare and issue the registration certificate.

Frequent changes make it even more important to manage the process carefully to avoid delay, and to work closely with a facilitator familiar with China’s regulatory system. The council’s Rachel Du, who has successfully managed dozens of registrations from her post in Beijing, notes that the details are subject to change.

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JULY 2014 | Ethanol Producer Magazine | 57

EXPORTS

12,000,000 10,000,000 8,000,000 World Total

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World ex China

4,000,000

China

2,000,000 0 2006 2007 2008 2009 2010 2011 2012 2013 SOURCE: US GRAINS COUNCIL

“Since the beginning of this year, for example, the Chinese Embassy in the U.S. has stopped accepting mail applications for authentications. China now requires that samples must be submitted within one month of dossier approval, and customs checks have been tightened so it is now more time-consuming to mail samples to China. Fortunately we are in daily contact with MOA, which makes it much easier to keep up with the changing requirements.”

The stakes are high. China has leapfrogged Canada and Mexico to become the world’s largest and fastest growing DDGS importer. And it will continue to be a growth market, as China’s surging middle class continues to demand steadily improving diets.

Policy considerations in China are also a factor. China remains committed to food security, and its definition of food security calls for self-sufficiency in wheat and rice.

Corn is a more complicated story. China is the world’s second-largest corn producer and had traditionally insisted on self-sufficiency (defined as 95 percent domestic production) in corn. As soaring protein demand has made that target increasingly difficult to meet, China has recently expressed greater flexibility. This liberalization, however, remains controversial in China. Corn is a staple of Chinese agriculture and China supports domestic producers through a tariff rate quota, which limits import volume and maintains a domestic corn price well above world market levels.

This policy mix inevitably creates additional demand for replacement feed ingredients.

Last year, for example, China surpassed Mexico as the top U.S. export destination for sorghum, which is not subject to the tariff rate quota. While DDGS has been mainstreamed as a conventional feed ingredient, there is undoubtedly additional demand stimulated by the artificial barriers to corn. Policy continues to evolve in many areas in China, and from a Council standpoint, trade liberalization and streamlined approval of biotech events are key concerns.

“We take a broad view,” said Lohmar. “In 2012, the Council celebrated its 30th anniversary of working in China. Most of our efforts over the years have been focused

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Sleight on technical assistance to the feed and livestock industry to build demand for feed grains, and these efforts have paid off as China is emerging as a top market for U.S. agricultural exports. With growing exports, problems will continue to arise, but we remain focused on where we need to be, both now and 10 and 20 years down the road. Chinaâ&#x20AC;&#x2122;s status as the worldâ&#x20AC;&#x2122;s top importer of DDGS is a tremendous success story, and we will work to keep that growth on track.â&#x20AC;?

Individuals wishing to learn more about the registration process in China are invited to contact Alvaro Cordero, manager of global trade in the councilâ&#x20AC;&#x2122;s Washington, D.C., office, at acordero@ grains.org, or Bryan Lohmar, director of the councilâ&#x20AC;&#x2122;s China office, at bryan. lohmar@grains.org.cn.

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Author: Tom Sleight President and CEO, U.S. Grains Council 202-789-0789 grains@grains.org

Ç Ç Ç Í&#x2DC;ĆľĆ?Ç Ä&#x201A;Ć&#x161;Ä&#x17E;Ć&#x152;Ć?Ä&#x17E;Ć&#x152;Ç&#x20AC;Ĺ?Ä?Ä&#x17E;Ć?Í&#x2DC;Ä?Žž ΡtÄ&#x17E; Ĺ˝/Ć&#x161;&Ĺ˝Ć&#x152;zŽƾ JULY 2014 | Ethanol Producer Magazine | 59

ENGINEERING

Industrial Facilities Turn To HDS for Retrofits, Expansions High-definition surveys bring the digital age to site planning, facility upgrades.

By Mike Hoffman

In the past, the conventional, manual surveying of industrial sites for retrofits or facility expansion often required hundreds of hours, sometimes over months, and occasionally involved potentially hazardous locations. When as-built infrastructures were hidden or not precisely detailed in original plans, the resulting survey errors usually led to expensive rework or change orders for retrofit or expansion projects.

Today, high-definition survey technology (HDS) makes it possible for data to be collected from hundreds of survey points, with densities and accuracies of one-eighth inch, in a matter of hours, instead of

days or weeks. Provided by professional specialists, HDS can be used to survey a plethora of industrial projects such as processing plants, refineries and mining operations that plan to make modifications, retrofit, expand or upgrade key equipment.

HDS technology is based on an imaging laser that collects up to 50,000 survey shots per second, making it far easier to provide data that can be used for 2-D line work or 3-D models.

The HDS system also features an external camera that collects photographic images in 360-degree, RGB color values. These image files are later fused to the data points that are assembled as â&#x20AC;&#x153;point clouds,â&#x20AC;? which can then be utilized for site mapping, project planning, and civil, structural and mechanical/electrical/plumbing design as data

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

60 | Ethanol Producer Magazine | JULY 2014

ENGINEERING is extracted into formats such as AutoCAD, Revit and MicroStation.

Savings, Efficiencies

Stan Postma is vice president of Utahbased engineering services firm, MWH Americas Inc. (a subsidiary of MWH Global).

His organization recently undertook the renovation of an industrial facility operated by the city of Logan, in northern Utah. “We needed to evaluate some existing structures, including a powerhouse that is about 100 years old,” Postma explains. “I knew about HDS type of scanning, and thought it would be a good application for the project. HDS captured all of the information about the building in a very quick and efficient manner, enabling us to plan around the existing structure with very accurate information.”

Postma says that the city of Logan also commissioned MWH to survey an existing dam that is going through some design modifications near the powerhouse site. He says the 3-D data the HDS system provided was very helpful in planning that project as well. According to Postma, this data enabled his staff to put the dam in a 3-D animation so they could view it from any angle. This was a very useful tool because it provided a precise reference, and eliminated the need to send personnel to the site for visual confirmations.

“We’re going to end up with savings on change orders and construction efficiencies all around,” Postma concludes. “Having all the information available in such great detail is going to save money. HDS scanning is very cost-efficient tool.”

Many design and engineering firms turn to HDS technology because the scans it provides are so accurate that it virtually removes the need to work from records that could be somewhat inaccurate, thereby eliminating the need for rework. Because all scanning is performed from ground level, HDS scanning technology is unobtrusive, making it unnecessary to interrupt production processes.

This convenience also adds a measure of safety, says Brian Akers, piping lead at Job Industrial Services Inc., which handles retrofit and expansion projects for a variety of industrial facilities throughout the U.S. “HDS technology improves on the safety of

our personnel, because we spend significantly less field time in potentially dangerous environments,” Akers explains. “This is the case particularly in the refinery industry, where you may have thousands of miles of infrastructure. If we’re doing a retrofit, we can have a service provide laser scans, and with the point cloud information, we can do a model a lot more accurately than we can do with conventional field measurements.”

Job Industrial Services asked McNeil Engineering to perform HDS scanning at a recent refinery project, because the team

possessed the necessary state-required training certification and other safety-related qualifications. “That removes the need for our organization to invest in HDS equipment, create a scanning team, and then send them out to the job sites,” Akers explains. “All that saves us capital and the loss of considerable production time at the office end.”

Author: Mike Hoffman McNeil Engineering 801-255-7700 info@mcneileng.com

JULY 2014 | Ethanol Producer Magazine | 61

TALKING POINT

Byproduct Evolves Into Preferred Feed Ingredient

By Kurt A. Rosentrater

Listening to the speakers at the recent Distillers Grains Symposium in Dallas, I had the chance to reflect on our industry’s past and future. Indeed,

the development of the types and qualities of distillers grains and other coproducts in the marketplace today began generations ago at beverage distilleries. At the turn of the 20th century, as various states adopted regulations to prevent pollution by dumping distillery waste into rivers, its use as a feed ingredient was born. With the advent of the fuel ethanol industry after World War II, these byproduct feeds were increasingly used.

During the initial buildup in the late 1970s and early 1980s, and then the exponential growth of the past decade, distillers grains quality has come to the forefront of many discussions.

Long gone are the days when distillers grains (dry, wet or modified) are seen as byproducts only, when the ethanol plants are in business only to produce fuel. The inherent value of coproducts is now recognized, as evidenced by the increasing number of plants that have installed centrifuges and are selling both distillers oil and low-oil distillers grains.

In fact, the sale of distillers oil has become economically important during the past few years, especially in light of the challenges the ethanol industry has faced.

Selling coproducts is a balancing act between many competing factors in the marketplace. We have the interests of the ethanol and beverage alcohol plants that produce the coproducts balanced against the livestock industry, comprised of domestic and international beef, dairy, swine and poultry customers. Some livestock producers actually view DDGS as a preferred feed ingredient,

62 | Ethanol Producer Magazine | JULY 2014

due to multiple benefits that it brings to their feeding operations. Add to this coproduct price (in relation to competing ingredients) and availability (including logistics such as this year’s rail transport issue).

Finding the right balance has taken tremendous effort over the years. Many have been involved in this endeavor, and much progress has been made. It is instructive to examine our progress to date. Back in 2005, we published an article in the inaugural issue of Distillers Grains Quarterly magazine and outlined the opportunities and challenges that our industry faced. In 2005, the top 10 research and development priorities included: 1) Augmenting use in species-specific livestock markets. 2) Improving nutritional content, quality and value. 3) Optimizing and maximizing inclusion rates; 4) Developing livestock feeds with higher value. 5) Utilizing next-generation coproducts from new ethanol processes. 6) Standardizing analytical laboratory methods. 7) Educating livestock producers. 8) Transportation issues. 9) Fractionating nutrients into concentrated streams. 10) Environmental issues. The list of other potential issues included antibiotic residues, sulfur and phosphorous levels, mycotoxin contamination, energy consumption and cost, optimizing coproduct quality and ethanol production, variability and consistency, flowability and developing other value-added uses.

Fast forward to 2014. Some of these issues have been completely resolved, such as the standardized laboratory procedures.

Unfortunately, most of the rest still require ongoing efforts to manage or mitigate.

Several emerging issues were discussed at the recent DGTC symposium and include: • Complying with the Food Safety and

Modernization Act regulations. The multitiered regulations will require significant effort to meet and all producers of fuel ethanol and beverage alcohol will be required to comply, although very small producers will be exempted from some of the requirements.

• Understanding performance impacts in various species when feeding low-oil distillers grains. Some work has been done, but more is needed to fully understand how best to feed these relatively new coproducts.

• Understanding the effects of fiber removal, especially in monogastrics. Some plants are starting to implement this next step to cellulosic ethanol. Understanding the impacts on coproducts and how to use them in livestock feeds is still in its infancy.

• Incorporating other new processing technologies at ethanol plants that alter or produce entirely new coproducts. What is their value, how can they be used, and under what official feed definition from the Association of American Feed Control Officials do they fit? Or, will they require a new definition?

• Protecting export trade. China imports about half of the DDGS shipped from the U.S. Issues with unapproved genetically modified traits in corn could be problematic this year, potentially hindering sales to China.

Overcoming our other challenges and improving coproduct quality and value is not yet complete. We must continue our efforts to achieve balance amongst the ethanol and beverage plants, livestock producers, price and availability.

Author: Kurt A. Rosentrater

Executive Director, Distillers Grains Technology Council 515-294-4019 karosent@iastate.edu

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BUSINESS MATTERS

Beware Wage And Hour Law Traps

By Megan E. Moritz

Plenty of potential legal snares threaten employers trying to comply with wage and hour laws. Consider the

following wage and hour traps for the unwary.

Trap No. 1: Forgetting other applicable laws.

This article focuses primarily on the federal Fair Labor Standards Act. However, states also have their own wage and hour laws. State law may give employees protections beyond those established under federal law.

Trap No. 2: Assuming the risk is lower than it is.

These laws are complicated and it’s relatively easy to stumble into a violation. Unfortunately, claims can be particularly difficult and expensive to defend.

• Even an inadvertent violation generally results in an award of back wages.

• If a court awards back wages, it also generally awards liquidated (double) damages.

• Legal fees incurred in defending a claim are often high, and an employer often pays for the plaintiff ’s lawyer where there’s been a violation.

• Plaintiffs can recover two years’ worth of back wages (or three if the violation is willful).

• Often, a pay practice impacts multiple employees or multiple positions.

We’re also seeing aggressive enforcement efforts by, and cooperation between, federal and state agencies.

Trap No. 3: Destroying an exemption by making improper salary deductions.

Unless an employee satisfies a particular statutory exemption, most are covered by the FLSA. There are many different exemptions under the act, and each has multiple factors to consider.

In addition to satisfying job-function requirements for a particular exemption, many also require minimum payment (often $455 per workweek) on a salary basis. Salary basis means the employee must regularly receive a predetermined amount for any week in which he performs any work. Generally speaking, unless the employee performs no work in the workweek, an employer may not change the amount paid based on changes in quality or quantity of work. The exemption can be destroyed if the employer makes improper deductions. For example, an employer may not dock an exempt employee’s pay for absences caused by the employer (i.e., closing for bad weather or when no work is available). There are only a handful of deductions for partial workweek absences: 64 | Ethanol Producer Magazine | JULY 2014

• Full-day absences for personal reasons, other than sickness or disability.

• Full-day absences due to illness or disability, if the employer has a bona fide paid sick leave policy or practice.

• Offsetting amounts received as jury or witness fees received during such absences.

• Offsetting pay received on military leave.

• Penalties for violating safety rules of “major significance.”

• Full-day deductions for unpaid disciplinary suspensions for serious misconduct violating written workplace rules.

• Proportionate deduction in the first and last weeks of employment.

• Deductions for unpaid family and medical leave.

Trap No. 4: Assuming employees are exempt from overtime or minimum wage requirements because they are paid a salary.

Many employers mistakenly believe they don’t have to keep track of hours worked or pay overtime to employees who are paid a salary rather than hourly. While salary pay often is one requirement for various exemptions, it’s never stands alone. Employers must always look at the actual job duties being performed and decide if they meet a particular exemption.

Trap No. 5: Forgetting to include bonuses or other incentive pay in nonexempt employee’s overtime rate.

Year-end and other bonus payments made to nonexempt employees frequently cause overtime problems for employers. Overtime pay must be calculated using an employee’s regular rate, which generally includes all amounts paid to an employee during the workweek. FLSA provides a few narrow exceptions. Employers often misapply the exception allowing discretionary bonuses to be excluded overtime calculations.

Few bonuses will be considered discretionary under the FLSA. Any bonus tied to production, attendance, efficiency or quality of work must be included in the regular rate, as well as most bonuses announced in advance. If a mid- or year-end bonus is not discretionary, it generally must be apportioned back over the period it covers to determine any additional overtime owed.

Employers who pay profit-sharing bonuses may exclude those amounts from hourly employees’ regular rates. However, the statutory exception imposes strict guidelines in this.

Author: Megan E. Moritz, Attorney BrownWinick Law Firm 515-242-2455 moritz@brownwinick.com

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