Technical Corn Oil Review December 2017
Brian Engel GM, Vegetable Oil Trading Green Plains Inc. NASDAQ: GPRE www.gpreinc.com Green Plains Partners LP NASDAQ: GPP www.greenplainspartners.com
Corn Kernel Components - One bushel = 56 lbs - 39.2 lbs of starch - 8.7 lbs of water - 5.6 lbs of protein - 1.9 lbs of tech corn oil - One bushel of corn produces - 18.2 lbs of ethanol - 15.5 lbs of DDGs Components of 1 Bushel of Corn 1.32% 33.06% 35.48% - 0.7 lbs of technical corn oil 30.14% Ethanol DDGS Biogenic Carbon Corn Oil Page 3
Wet Mill Ethanol Process Key Differentiations Wet mill separates into four basic components: germ, starch, fiber & gluten protein Starch separation is first step and removed from rest of kernel components Starch is turned into ethanol while hexane is used to extract corn oil from germ Since corn oil is extracted via chemical process, wet mills can recover 100% of the corn oil available in the corn kernel Page 4
Dry Mill Ethanol Process Key Differentiations Dry milling processes the entire corn kernel into flour, without separating into various components Water is added to create a mash that then undergoes a fermentation process, which take 40-50 hours After distillation, the mash is transferred into distillation columns where anhydrous ethanol is separated through remaining stillage Stillage is sent through another centrifuge that to separates water, proteins, fibers from the solubles A third centrifuge is used to remove the remaining water from the syrup stream before adding back into the stillage stream prior to drying for DDGS production Technical corn oil recovery occurs during the third centrifuge process (oil/water separation via gravity) Of the 1.9 pounds available, only.7 pounds is actually recovered via natural separation, meaning only 1% of the total content available in a bushel of corn is spontaneously separated Page 5
Technical Corn Oil Specifications vs. Crude Corn Oil Specifications Page 6
Further Processing Required Technical Corn Oil contains elevated levels of FFAs, gums, metals (minerals), color and MIU that need to be treated before the material can be converted For biodiesel, these impurities, without pretreatment, will cause damage to catalytic converters and lower yields For feed use, technical corn oil is not fed directly to livestock, chickens or swine For livestock and chickens, technical corn oil is mixed with DDGs, hay, silage, flake, hulls and other agricultural foliage for better digestibility Swine producers prefer a ration that does not include technical corn oil as the material has a tendency to cause a condition know as soft bellies Page 7
Technical Corn Oil Supply 6,300 5,950 5,600 5,250 4,900 4,550 4,200 3,850 3,500 3,150 2,800 2,450 2,100 1,750 1,400 1,050 700 350 - U.S. Corn Oil Supply and Demand source: USDA Grain Crushing Report Domestic Use (MM Lbs) Exports (MM Lbs) U.S. Recovery (MM Lbs) Dry mills started adopting centrifuge recovery systems in 2005/2006 Dry milling operations account for 62% of total corn oil recovered on an annualized basis Ethanol supply and demand is the driving force Wet milling operations account for 38% of total corn oil recovered on an annualized basis Starch and sweetener demand is the driving force Page 8
MM Lbs MM Gals TCO Demand For Biofuels Technical Corn Oil is the second most used feedstock for domestic biodiesel production behind soybean oil @ 13.17% feedstock share International feedstock demand remains firm with monthly exports running 17 20mm lbs U.S. Bio Feedstock Usage Monthly U.S. Biodiesel Production (MM Gals) 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - Canola Oil Corn Oil Soybean Oil Poultry Fat 2014 2015 2016 2017 Tallow & White Grease Yellow Grease 150 135 120 105 90 75 60 45 30 15 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 2017 Source: EIA Monthly Biodiesel Page 9
TCO Demand For Feed There are three main types of distillers grains: traditional, with more than 10% crude fat; low-fat, with 5% to 9% crude fat; and de-oiled, with less than 5% crude fat Low-fat distillers grains will likely result in a lower energy content Fat content not main driver when determining ration: Oil left in DDGS after recovery is LESS digestible than the oil that is recovered during the dry milled ethanol process Recovered oil was 92% digestible while the oil left in the grain is only 50% digestible U.S. ethanol producers recovered 3.1 billion pounds of technical corn oil in 2016, of that 866 million pounds was used for feed or 29% of total production Poultry producers supplement poultry rations with technical corn oil due to the unsaturated fats present in the oil which are easier for chicks to digest and the carotenoids present which give chicken skin a more appealing pigment Livestock producers supplement livestock rations with technical corn oil at 2% of the entire ration Technical corn oil is limited in swine diets, as it is attributed to soft bellies, a negative impact on bacon quality Research has shown efficiency gains in the DDGs drying process as a result of technical corn oil recovery Cleantech Corp published study indicating a 10% improvement in drying efficiency National Corn to Ethanol Research Center study claims >4% improvement in drying efficiencies Sources: http://www.grains.org/news/20160107/usgc-study-demonstrates-new-value-corn-distillers-oil-poultry http://nationalhogfarmer.com/business/different-distillers-grains-may-change-feed-rations http://www.nd.gov/ndic/renew/meeting0903/r005-b-prop.pdf Page 10
Technical Corn Oil vs Soybean Oil Page 11
Technical Corn Oil Summary Recovered from liquid stream, natural water / oil separation Recovery started in 2005/2006 Less than 2% of total corn is recovered as oil Industry recovering over 3.1 billions lbs /year Requires further processing than other fats and oils Offered to fuel and feed markets Feedstock for US biodiesel production approximately 13% of total use Feed markets significantly deviate on value of oil content Page 12
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