Major grain traders face one-two punch from U.S. floods, trade war

Water stands next to a field of crops near Putnam County, Illinois, U.S. July 5, 2019. Picture taken July 5, 2019. REUTERS/Stephanie Kelly

By Karl Plume

CHICAGO (Reuters) – Severe U.S. weather likely dented earnings for large grain companies including Archer Daniels Midland Co and Bunge Ltd for a second straight quarter, adding to headwinds from a still-unresolved U.S.-China trade war, analysts and economists said.

ADM and Bunge, as well as peers Cargill Inc and Louis Dreyfus Co, known as the ABCD quartet of global grain trading giants, faced processing-plant downtime, rail, and barge shipping delays and other supply uncertainty this spring as historic floods ravaged the central United States.

The weather woes are heaping more pain on the battered U.S. agricultural sector already hard-hit by a years-long crop supply glut and the U.S.-China trade war now entering its second year. The tariffs China imposed on soybean exports from the United States in retaliation for U.S. duties on Chinese goods curbed shipments of the most valuable U.S. export crop.

The excessive rains and flooding could also have a lasting impact on the grain merchants, whose latest round of quarterly earnings will start this week. ADM and Cargill are viewed as particularly vulnerable due to their outsized U.S. footprints. Reduced U.S. corn and soybean plantings will likely cut available crop supplies in the United States, potentially driving up raw material costs and squeezing margins.

“They thrive on volumes and margins and both of those are going to be depressed in the coming year with the bushels being smaller and the margins likely not being there,” said Kevin McNew, chief economist with Farmers Business Network. “Export business is just going to fall off the cliff, especially for corn.”

The U.S. corn crop was more affected by floods than soybeans because soy can be planted later in the season.

FILE PHOTO: A flooded parcel of land along the Platte River is pictured in this aerial photograph at La Platte, south of Omaha, Nebraska, U.S. March 19, 2019. REUTERS/Drone Base/File Photo

FILE PHOTO: A flooded parcel of land along the Platte River is pictured in this aerial photograph at La Platte, south of Omaha, Nebraska, U.S. March 19, 2019. REUTERS/Drone Base/File Photo

WEAKER RESULTS

The first of the companies scheduled to report is privately held Cargill, which announces fiscal fourth-quarter earnings on Thursday.

The results will cover the March-to-May period, when flooding disrupted grain movement, including export shipments, and the year’s second “bomb cyclone” blizzard temporarily shuttered at least six Cargill grain handling facilities and a beef processing plant.

Cargill and ADM both own barge companies that haul grain and other products on the Mississippi River and its tributaries. Grain barge movement so far this year is down about 37% from a year ago, according to U.S. Army Corps of Engineers data, due largely to prolonged river closures triggered by floods.

Cargill is expected to report weaker results compared with the very strong earnings of the year-ago quarter, due partly to expected lower profit in its origination and processing unit, said Bill Densmore, senior director of corporate ratings at Fitch Ratings.

Bunge and ADM will follow, with second-quarter results covering April, May and June scheduled for release on July 31 and Aug. 1, respectively. Privately held Louis Dreyfus is expected to issue interim first-half results in the autumn.

Shares of publicly traded ADM and Bunge are hovering just above three-year lows notched this spring as mounting concerns about U.S. plantings and trade fueled investor nervousness.

FILE PHOTO: Flooded farm fields are seen from an aerial photo taken while Nebraska Army National Guard Soldiers used a CH-47 Chinook helicopter to deliver multiple bales of hay to cattle isolated by historic flooding in Richland, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. Courtesy Lisa Crawford/Nebraska National Guard/Handout via REUTERS

FILE PHOTO: Flooded farm fields are seen from an aerial photo taken while Nebraska Army National Guard Soldiers used a CH-47 Chinook helicopter to deliver multiple bales of hay to cattle isolated by historic flooding in Richland, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. Courtesy Lisa Crawford/Nebraska National Guard/Handout via REUTERS

UNEVEN IMPACTS

With its concentration of assets in the United States and its large U.S. ethanol business, ADM was likely hit harder by adverse U.S. weather than Bunge, analysts said.

ADM cited poor U.S. weather for a nearly $60 million drop in operating profit in its first quarter and warned in April that lingering weather impacts would cut second-quarter earnings by $20 million to $30 million. Some analysts expect ADM to post as large a hit to second-quarter earnings as in the first quarter as adverse weather stretched through the spring season.

“ADM’s first-quarter estimate of $50-60 million seems like a good starting point” for the second-quarter impact, said Seth Goldstein, analyst with Morningstar.

ADM’s soy processing, ethanol and sweeteners and starches units may post lower margins, and smaller corn and soybean crops will hurt its grain origination business, said Heather Jones, founder and senior analyst with Heather Jones Research LLC.

The price of corn, the most common feedstock for U.S. ethanol makers, has surged as U.S. farmers struggled to plant the 2019 crop due to a historically soggy spring. Cash corn premiums in parts of the eastern Midwest, where planting delays were most acute, are at a six-year high. Soybean prices hit a one-year top last week.

“Bunge is less exposed, but higher bean costs would squeeze soy crush margins in the U.S.,” Jones said. Bunge is the world’s largest soybean processor.

(Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and Matthew Lewis)

Armada of barges cleared for Mississippi River shipments after floods

FILE PHOTO: The Peoria Lock and Dam building is shown surrounded by flood waters of the Mississippi River in Peoria, Illinois, U.S., May 16, 2019. U.S. Army Corps of Engineers/Rock Island District/Handout via REUTERS

By Karl Plume

CHICAGO (Reuters) – The upper Mississippi River reopened to barge traffic on Friday as vessels were cleared to ship through St. Louis harbor, the U.S. Coast Guard (USCG) said, and the situation quickly became a logistics nightmare as dozens of towboats and hundreds of delayed barges tried to maneuver upriver.

After what many grain shippers have called the worst river flooding ever in terms of timing, breadth and duration, the vessels may finally be able to reach elevators in the heart of the U.S. farm belt to haul away export-bound corn and soybeans.

But the economic pain of this year’s floods on farmers, barge operators and grain traders like Archer Daniels Midland Co, Bunge Ltd and Cargill Inc will likely continue.

The Mississippi River, which transports 60 percent of all export-bound U.S. corn and soybeans to terminals near the Gulf Coast, has not been fully navigable since November due to winter closures in the north and widespread flooding this spring.

Shippers have moved some grain to port by rail, shipped it to domestic users by truck or simply left crops in storage and dropped prices offered to farmers.

Shipping delays were the latest hit to a reeling U.S. agricultural sector, already clobbered by slumping farm incomes, delayed spring planting and reduced exports due to the U.S.-China trade war.

Petty Officer Brandon Giles said the Coast Guard lifted its ban on northbound shipping through St. Louis harbor on Friday morning, allowing vessels to transit the busy port for the first time since a brief shipping window opened for a week and then closed a month ago.

Giles had no estimate as to when southbound traffic will resume. Barge shippers said southbound vessels may be cleared as soon as Saturday.

An armada of at least 50 towboats, each pushing multiple barges, was already converging on St. Louis harbor, a barge broker said. The vessels may experience lengthy delays at upriver locks that have also only recently reopened from flood closures.

Shipping restrictions due to strong currents and river-bottom obstructions from flooding were likely to remain in place for the foreseeable future.

More rain is expected over the next week, potentially slowing the river’s anticipated drop or triggering fresh restrictions on navigation.

“It won’t be like in a car race, going from a yellow flag to a green flag. It’s going to take a while to get back up to the throughput that river is normally able to provide,” said Mike Steenhoek, executive director of the Soy Transportation Coalition.

“The worry is that this could be a very brief relaxation of restrictions, just a temporary reprieve,” he said.

BACKLOG OF BUSINESS

River closures delayed fertilizer deliveries earlier this spring as farmers prepared to plant crops. Now, as farmers are cleaning out storage bins to make room for the next harvest, the river woes have slowed the flow of grain to market.

Large agribusinesses that rely on efficient export shipments are likely to report a drag on earnings from flooding this spring in their grain trading, handling and shipping businesses when they report in July and August, analysts said.

ADM, Bunge, Cargill and Louis Dreyfus Co, known as the ABCD quartet of grain giants, all operate large export terminals along the Mississippi River near the Gulf Coast. ADM and Cargill also both own barge companies.

A backlog of grain business that has been on hold for much of the spring could have shippers and exporters playing catch-up through the summer.

“It will take me probably until the end of August to get caught up with all the freight I owe for April, May and June when we were shut down,” one barge broker said.

The flood’s cost to the grain handlers likely totals hundreds of millions of dollars, traders and shippers estimated, due to lost grain sales, missed shipping and export opportunities and increased costs for moving needed grain supplies via other means such as rail.

Weekly grain barge unloads at Gulf Coast elevators fell to just 349 barges last week, the least in any week in six years, according to U.S. Department of Agriculture data.

Although railcar shipments to the Mississippi Gulf have more than doubled, grain volumes have been minimal. It takes 15 rail cars to move what a single barge can.

(Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and David Gregorio)

Floods stall fertilizer shipments in latest blow to U.S. farmers

FILE PHOTO: The contents of grain silos which burst from flood damage are shown in Fremont County Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek

By Karl Plume

CHICAGO (Reuters) – Farm supplier CHS Inc has dozens of loaded barges trapped on the flood-swollen Mississippi River near St. Louis – about 500 miles from the company’s two Minnesota distribution hubs.

The barges can’t move – or get crucial nutrients to corn farmers for the spring planting season – because river locks on the main U.S. artery for grain and fertilizer have been shuttered for weeks. High water presents a hazard for boats, barges and lock equipment.

Railroads have also been plagued by delays from winter weather and flooding in the western Midwest, further disrupting agricultural supply chains in the nation’s breadbasket.

FILE PHOTO: Flood damage is shown in this aerial photo in southwestern Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek/File Photo

FILE PHOTO: Flood damage is shown in this aerial photo in southwestern Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek/File Photo

The transportation woes are the latest headache for a U.S. agricultural sector reeling from years of slumping profits and the U.S.-China trade war, and they threaten to cut the number of acres of corn and wheat that can be planted this year.

The shipping delays follow months of bad weather in the rural Midwest, including a “bomb cyclone” that flooded at least 1 million acres (405,000 hectares) of farmland last month and a record-breaking April snow storm.

“Our barges are a long way from where we need them in the upper Midwest,” said Gary Halvorson, senior vice president of agronomy at CHS. “We really don’t think that any rail line will be at their preferred service rate until summer.”

Agricultural retailers rely on barges and trains to resupply distribution warehouses across the farm belt. But river flooding has delayed the seasonal reopening of the northern reaches of the Mississippi River to barge traffic. The latest National Weather Service river forecasts suggest one of the river’s southernmost locks could remain closed until at least the first week of May.

FALLING PROFITS, PRODUCTION

Reduced or poorly timed fertilizer applications can hurt yields, potentially denting this year’s U.S. farm profits, which are already predicted to be about half of their 2013 peak, according to the latest U.S. government forecast. Delayed shipments can also mean lost sales for farm suppliers and higher demurrage penalties, or late-return charges, on stalled barges and rail cars.

CHS, one of the largest publicly traded U.S. agriculture suppliers, said this month cited poor weather as a key reason for a $8.9 million drop in agricultural profits during its fiscal second quarter.

Agribusiness giant Archer Daniels Midland Co said severe weather and flooding would cut its first-quarter profit by $50 million to $60 million while DowDuPont said flooding would slash first-quarter profits in its agriculture division by 25 percent.

Fertilizer producers such as Nutrien Ltd, Mosaic Co and Yara International also lost sales due to bad weather in the fourth quarter of last year and first quarter of this year. Mosaic announced last month that it would cut U.S. phosphate fertilizer production by 300,000 tonnes for the spring season due to poor weather and large inventories left over from the fall.

Farm retailers such as CHS and privately held Growmark may see additional losses through the spring season as the tighter planting window limits the application services they provide, according to CoBank analyst Will Secor.

SCRAMBLING TO PROTECT CROP YIELDS

Farmers are not expected to skip nitrogen fertilizer applications entirely, which would cause yields to drop by about half, according to Purdue University agronomist Bob Nielsen. But higher nutrient costs could have growers applying less-than-optimal amounts.

Some farmers could shift from corn to soybeans, which can be planted later and require fewer fertilizer applications. But soybeans will continue to face uncertain demand as long as the U.S. and top buyer China remain locked in a trade war.

“Right now my plan is to plant more corn because the price of beans is so low,” said Don Batie, a farmer near Lexington, Nebraska.

The weather problems started last autumn, a period when some farmers treat fields after harvesting in preparation for the following spring. But wet weather prevented fall fertilizer applications, and an exceptionally snowy winter in many areas slowed or halted winter field work.

More recent storms have threatened to narrow the limited spring window for field treatments.

“When you add to it this re-supply constraint of not being able to move barges up the Mississippi, it puts us in a precarious position,” said Kreg Ruhl, manager for crop nutrients division at Growmark, the country’s third-largest agriculture retailer in terms of revenue.

PRICES RISING

Retail fertilizer prices have started rising in parts of the Midwest and are likely to rise further as local supplies are depleted and retailers scramble to resupply.

In Iowa, the top U.S. corn producing state, the price of the common fertilizer urea was up 20 percent in late April from a year ago, and anhydrous ammonia was up 27 percent. Both hit their highest early spring levels in three years, according to U.S. Department of Agriculture data.

Without timely barge deliveries, CHS will lean on its rail network that brings imported supplies from Galveston, Texas, to any of the 29 rail hubs it owns in places like Sioux Falls, South Dakota; Marshall, Minnesota; and Minot, North Dakota.

Higher U.S. fertilizer prices and strong demand from other countries could help producers such as Nutrien, Mosaic and Yara recover some recent profit weakness in upcoming quarters.

For farmers and fertilizer retailers, however, uncertain fertilizer deliveries will likely weigh on agricultural markets through the planting season.

“We’re doing our very best to make sure that our retail network is supplied,” said CHS’s Halvorson.

(Reporting by Karl Plume in Chicago Editing by Brian Thevenot and Caroline Stauffer)

U.S. farmers scramble to harvest crops as hurricane looms

FILE PHOTO: Lester "Buddy" Stroud, a farm hand at Shelley Farms, walks through a field of tobacco ready to be harvested in the Pleasant View community of Horry County, South Carolina, U.S., July 26, 2013. REUTERS/Randall Hill/File Photo

By Tom Polansek and P.J. Huffstutter

(Reuters) – As powerful Hurricane Florence crept closer to the southeastern United States on Tuesday, farmers in North Carolina rushed to harvest corn and tobacco and stock up on pig rations, while the danger of deadly flooding threatened a state where millions of farm animals are housed.

The forecasts for devastating rain and winds also had WH Group’s Smithfield Foods [SFII.UL], the largest U.S. pork processor, planning to shut two of its North Carolina plants – including the world’s biggest hog slaughterhouse.

Meanwhile, pig farmers across the state were lowering levels of liquid manure in outdoor storage pits in an effort to avoid a repeat of Hurricane Floyd. The 1999 storm flooded manure pits and contaminated waterways with animal carcasses and waste.

FILE PHOTO: Farm workers place harvested tobacco on a conveyor at Shelly Farms in the Pleasant View community of Horry County, South Carolina, U.S., July 26, 2013. REUTERS/Randall Hill/File Photo

FILE PHOTO: Farm workers place harvested tobacco on a conveyor at Shelly Farms in the Pleasant View community of Horry County, South Carolina, U.S., July 26, 2013. REUTERS/Randall Hill/File Photo

North Carolina is the country’s leading producer of tobacco, second-biggest producer of hogs and a major poultry producer. Its crops include corn, soy and cotton, making agriculture the state’s No. 1 industry, valued at $87 billion.

“The governor said that North Carolina is the bull’s eye of this hurricane,” Larry Wooten, president of the North Carolina Farm Bureau, said in an interview. “I’ll tell you, agriculture is in the heart of that bull’s eye.”

Florence, a Category 4 storm with winds of 130 miles per hour (210 kph), was expected to make landfall on Friday, bringing heavy, sustained rain and potentially deadly flooding to the U.S. Southeast coast. Some 1 million people have been ordered to evacuate.

Two-thirds of North Carolina’s farm income comes from poultry and livestock, including hogs and dairy cattle, according to Wooten. The state has 8.9 million swine, 12 percent of the U.S. herd, U.S. Agriculture Department data showed.

In 2017, its farmers raised 830.8 million chickens for meat, 9 percent of the U.S. flock, and 32.5 million turkeys, or 13 percent of the U.S. total, according to USDA data.

It is unclear how many farm animals are in the storm’s path, according to both Wooten and the North Carolina Poultry Federation.

Two years ago, more than a million poultry birds died when floodwaters from Hurricane Matthew covered areas across central and eastern North Carolina. Carcasses were composted inside the houses where the birds were being raised.

More than 20 inches (51 cm) of rainfall are possible across eastern North Carolina, said Don Keeney, senior agricultural meteorologist for weather forecaster Radiant Solutions.

The approaching storm also prompted commodity handler Cargill Inc [CARG.UL] to make plans to close meat processing plants in West Columbia, South Carolina, and Dayton, Virginia, on Friday. Both Cargill and Smithfield said the plant closures were due to safety concerns.

CORN ‘ROUND THE CLOCK

Bo Stone, who raises corn and hogs in Rowland, North Carolina, said he worked into the night to harvest his crop to avoid damage from high winds. On Tuesday, rain halted his progress. “We’ve been running as hard as we can go,” he said.

Stone said relocating animals in the storm zone was not an option for many farmers. “Nobody would have the capacity to handle your animals,” he said.

Tall corn and tobacco crops are most vulnerable to wind damage and difficult to harvest if knocked down, said Rhonda Garrison, executive director of the Corn Growers Association of North Carolina.

“They’re around the clock on corn,” said Andy Curliss, chief executive officer for the NC Pork Council, an industry group.

North Carolina’s corn crop was 43 percent harvested as of Sunday, while the type of tobacco most commonly grown in the state was 67 percent harvested, according to USDA data.

North Carolina has waived transportation rules to help farmers move crops and livestock ahead of the most severe storm to threaten the U.S. mainland this year. “During harvest, time is of the essence,” Governor Roy Cooper said in announcing a state of emergency.

Altria Group Inc, the parent of Philip Morris USA, said the storm could potentially affect tobacco fields, and is exploring its crop-buying options to offset any losses. British American Tobacco’s Reynolds American, parent of R.J. Reynolds Tobacco, declined to comment.

North Carolina hog farmers have been spraying hog manure on farmland to lower the levels of waste in storage pits, known as lagoons, said Andrea Ashby, spokeswoman for the state’s Department of Agriculture and Consumer Services.

“The levels are in pretty good shape to handle the rain, but it all depends on how much rain we get,” Ashby said.

Most manure pits could handle up to 25 inches of rain, Curliss said.

Smithfield Foods said in a statement it has been lowering waste levels as necessary on its farms and encouraging farmers from whom it buys hogs to do the same.

(Reporting by Tom Polansek and P.J. Huffstutter in Chicago; Additional reporting by Julie Ingwersen in Chicago; Editing by Toni Reinhold and Matthew Lewis)

Trump administration weighs high-ethanol fuel waiver to placate farmers

A gas pump selling E15, a gasoline with 15 percent of ethanol, is seen in Mason City, Iowa, United States, May 18, 2015. REUTERS/Jim Young

By Jarrett Renshaw and Chris Prentice

NEW YORK (Reuters) – The Trump administration is considering allowing the sale of a higher ethanol fuel blend in the summer, a source familiar with the issue said, a move that would placate corn growers worried about the future of U.S. biofuels policy.

President Donald Trump recently met with the heads of the Environmental Protection Agency and the U.S. Department of Agriculture to discuss ways to make the Renewable Fuel Standard less expensive to the oil industry without undercutting demand for ethanol.

The RFS requires refiners to add increasing volumes of biofuels like corn-based ethanol into the nation’s fuel supply each year. That is a boon to farmers but a headache for refining companies, which must either blend the fuels themselves or purchase credits from those who do.

Over the past several months, Trump has unsuccessfully tried to broker a deal between “Big Oil” and “Big Corn” over the issue, and has faced mounting pressure from lawmakers in the Midwest, who are concerned that he will weaken domestic demand for ethanol at a time farmers are potentially facing a trade war with China that could hurt export demand for corn and soybeans.

Sources had told Reuters this week that Trump was temporarily suspending his consideration of a refining industry-backed proposal to cap prices for blending credits, an idea that the biofuels industry has opposed as damaging to farmers.

But in the meantime, the administration is considering moving forward with plans to allow for the ethanol industry’s long sought waiver to sell gasoline containing 15 percent ethanol in the summer, instead of the usual 10 percent blend, the source familiar with the issue told Reuters on Wednesday.

The higher ethanol blend, called E15, is currently banned by the Environmental Protection Agency because of concerns it contributes to smog on hot days, a worry that biofuels advocates say is baseless.

“EPA has been assessing the legal validity of granting an E15 waiver since last summer,” said EPA spokeswoman Liz Bowman in an emailed statement, noting the agency is awaiting an outcome from discussions with the White House, the USDA and Congress before making any final decisions or preparing regulatory actions.

White House spokeswoman Kelly Love did not comment on the E15 waiver but said that during Trump’s meeting Monday he “instructed his cabinet to continue to explore options that protect American farmers and America’s refinery workers.”

Biofuels proponents have heaped pressure on the White House after reports that the EPA was granting dozens of small refineries exemptions from the RFS to help them avoid the costs of compliance, something the ethanol industry says will weaken demand for their product.

On Monday, Trump acknowledged farmers may bear the brunt of the economic harm if China retaliates against Washington’s threat of tariffs, adding that “we’ll make it up to them.” Many U.S. farmers are battling debt after years of excess global supplies and depressed prices.

“We need some good news out here,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

“The best news (Trump) could give us right now is year-round sales of E15,” he said.

(Reporting by Chris Prentice and Jarrett Renshaw; Editing by Steve Orlofsky)

Exclusive: Vomitoxin makes nasty appearance for U.S. farm sector

FILE PHOTO -- Cobs of corn are held at a corn field in in La Paloma city, Canindeyu, about 348km (216 miles) northeast of Asuncion August 7, 2012. Corn export is second only to soybean export in Paraguay. REUTERS/Jorge Adorno/File Photo

By P.J. Huffstutter and Michael Hirtzer

CHICAGO (Reuters) – A fungus that causes “vomitoxin” has been found in some U.S. corn harvested last year, forcing poultry and pork farmers to test their grain, and giving headaches to grain growers already wrestling with massive supplies and low prices.

The plant toxin sickens livestock and can also make humans and pets fall ill.

The appearance of vomitoxin and other toxins produced by fungi is affecting ethanol markets and prompting grain processors to seek alternative sources of feed supplies.

Researchers at the U.S. Department of Agriculture first isolated the toxin in 1973 after an unusually wet winter in the Midwest. The compound was given what researchers described as the “trivial name” vomitoxin because pigs were refusing to eat the infected corn or vomiting after consuming it. The U.S. Corn Belt had earlier outbreaks of infection from the toxin in 1966 and 1928.

A vessel carrying a shipment of corn from Paraguay is due next month at a North Carolina port used by Smithfield Foods Inc [SFII.UL], the world’s largest pork producer.

The spread of vomitoxin is concentrated in Indiana, Wisconsin, Ohio, and parts of Iowa and Michigan, and its full impact is not yet known, according to state officials and data gathered by food testing firm Neogen Corp.

In Indiana, 40 of 92 counties had at least one load of corn harvested last fall that has tested positive for vomitoxin, according to the Office of Indiana State Chemist’s county survey. In 2015 and 2014, no more than four counties saw grain affected by the fungus.

And in a “considerable” share of corn crops tested in Michigan, Wisconsin and Indiana since last fall’s harvest, the vomitoxin levels have tested high enough to be considered too toxic for humans, pets, hogs, chickens and dairy cattle, according to public and private data compiled by Neogen. The company did not state what percent of each state’s corn crop was tested.

Smithfield would not confirm it had ordered the corn from Paraguay, but two independent grain trading sources said Smithfield was the likely buyer. A company source said corn Smithfield has brought in from Indiana and Ohio, to feed pigs in North Carolina, has been “horrible quality” due to the presence of mycotoxins.

TOXIN LEVELS

The U.S. Food and Drug Administration allows vomitoxin levels of up to 1 part per million (ppm) in human and pet foods and recommends levels under 5 ppm in grain for hogs, 10 ppm for chickens and dairy cattle. Beef cattle can withstand toxin levels up to 30 ppm.

Alltech Inc, a Kentucky-based feed supplement company, said 73 percent of feed samples it has tested this year have vomitoxin. The company analyzed samples sent by farmers whose animals have fallen ill.

“We know there is lots of bad corn out there, because corn byproducts keep getting worse,” said Max Hawkins, a nutritionist with Alltech.

Neogen, which sells grain testing supplies, reported a 29 percent jump in global sales for toxin tests – with strong demand for vomitoxin tests – in their fiscal third quarter, ending Feb. 28.

“We’re polling our customers and continually talking to them about the levels they’re seeing. Those levels are not going down,” said Pat Frasco, director of sales for Neogen’s milling, grain and pet food business.

The problem, stemming from heavy rain before and during the 2016 harvest, prompted farmers to store wet grain, said farmers, ethanol makers and grain inspectors.

The issue was compounded by farmers and grain elevators storing corn on the ground and other improvised spaces, sometimes covering the grain piles with plastic tarps. Grain buyers say they will have a clearer picture of the problem later this spring, as more farm-stored grain is moved to market.

Iowa State University grain quality expert Charles Hurburgh said the sheer size of the harvest in 2016 – the largest in U.S. history – complicates the job of managing toxins in grain, especially in the core Midwest.

“Mycotoxins are very hard to handle in high volume,” he said. “You can’t test every truckload, or if you do, you are only going to unload 20 trucks in a day.” By comparison, corn processors in Iowa unload 400 or more trucks a day.

BIOFUEL IMPACTS

Ethanol makers already are feeling the impact. Turning corn into ethanol creates a byproduct called distillers dried grains (DDGs), which is sold as animal feed. With fuel prices low, the DDGs can boost profitability.

But the refining process triples the concentration of mycotoxins, making the feed byproduct less attractive. DDG prices in Indiana fell to $92.50 per ton in February, the lowest since 2009, and now are selling for $97.50 per ton, according to USDA.

Many ethanol plants are testing nearly every load of corn they receive for the presence of vomitoxin, said Indiana grain inspector Doug Titus, whose company has labs at The Andersons Inc, a grain handler, and energy company Valero Energy sites.

The Andersons in a February call with analysts said vomitoxin has hurt results at three of its refineries in the eastern U.S. “That will be with us for some time,” Andersons’ chief executive Pat Bowe said.

Missouri grain farmer Doug Roth, who put grain into storage after last year’s wet harvest, has seen a few loads of corn rejected by clients who make pet food after the grain tested positive for low levels of fumonisin, a type of mycotoxin.

Roth said he paid to reroute the grain to livestock producers in Arkansas, who planned to blend it with unaffected grain in order to mitigate the effect of the toxins.

“As long as this doesn’t become a widespread problem, we’re all fine,” said Roth, who said toxins have shown up in less than 1 percent of the grain loads he has sold.

U.S. farmers with clean corn are reaping a price bump. A Cardinal Ethanol plant in Union City, Indiana, is offering grain sellers a 10-cent per bushel premium for corn with less than one-part-per-million (ppm) or less of vomitoxin in it, according to the company’s website.

(Additional reporting by Karl Plume and Julie Ingwersen in Chicago; Editing by Matthew Lewis)

UN Asks US To Stop Biofuel Production

The United Nations has called on the United States to end production of biofuel ethanol because of the current worldwide food crisis.

Current US law requires that 40% of the nation’s corn must be used to create biofuel. Prices are currently facing significant increases with the USDA estimating the corn yield will be the lowest in 16 years. The shortfall is estimated to cause close to a 40 percent rise in prices per bushel. Continue reading