Dried Distiller Grains with Solubles

TITLE OF SLIDE
Sub-title of slide
US Ethanol Industry,
Production Process,
& Global Logistics
David Kiesner
Senior Merchandiser
POET Nutrition
Ethanol & DDGs Market Evolution
1995-2000 2001-2006 2007-2011 2012-Present
First production of Introduction of Rapid increase in Advent of oil
DDGs from dry DDGs into feed ethanol production extraction
mill ethanol rations for: requires results in
process. New Beef development of various grades
feed ingredient Dairy international markets of DDGs and
unlike Gluten Swine to balance increase feed ration
Meal produced Poultry in DDGs. composition.
from wet mills.

Ethanol Production
Millions of Gallons
15000
13000
11000
9000
7000
5000
3000
1000
-1000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Corn Based Ethanol
Ethanol can be used produced from a
variety of feedstocks. In the US the
most common is corn. The majority of
US produced ethanol goes into the fuel
industry and is blended with petroleum
for use in motor vehicles.
Commercial Products
Distillers Dried Grains
with Solubles (DDGS)
DDGS is a feed co-product of Ethanol.
The US industry produces over 40 Million
MT of DDGS each year which supplies the
world with a highly nutritional ingredient
for feeding poultry, swine, beef cattle,
dairy, and aquaculture.
Crude Corn Oil
Crude Corn Oil is extracted from the
sulubles during the ethanol production
process. Corn oil is utilized as a high
energy fat in animal feed rations as well
as a feedstock for the bio-diesel industry.
Further developments in refining are
leading to new industrial applications for
corn oil.
Carbon Dioxide CO2
Carbon dioxide (chemical formula CO2) is
a colorless and odorless gas captured on
the back end of the ethanol production
process. Carbon Dioxide is most
commonly used for carbonation in the
beverage industry.
US Corn Production & Ethanol Plants
POET Ethanol Plant Locations
World DDGS Imports
1,600,000.0

1,400,000.0

1,200,000.0

1,000,000.0

800,000.0

600,000.0

400,000.0
Jan Feb Ma r Apr MAY JUN JUL AUG SEP OCT NOV DEC

2013 2014 2015 2016 Pri or 5 year avera ge

 China vs. Rest of World
China Distillers Grain Imports Non-Chinese Distillers Grain Imports
1,200,000.0 1,000,000.0

900,000.0
1,000,000.0
800,000.0
800,000.0
700,000.0

600,000.0 600,000.0

500,000.0
400,000.0
400,000.0
200,000.0
300,000.0

0.0 200,000.0
Jan Feb Mar Apr MAY JUN JUL AUG SEP OCT NOV DEC Ja n Feb Ma r Apr MAY JUN JUL AUG SEP OCT NOV DEC

2013 2014 2015 2016 Pri or 5 yea r avera ge 2013 2014 2015 2016 Pri or 5 year average
 China vs. Rest of World
1,200,000 100%

90%
1,000,000
80%

70%
800,000

60%

600,000 50%

40%
400,000
30%

20%
200,000

10%

- 0%
13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16
n - a r- ay- Ju l - e p - ov- a n - a r- ay- Ju l - e p - ov- a n - a r- ay- Ju l - e p - ov- a n - a r- ay- Ju l - 5 4 5 6 8 9 0 9 0 1 3 4 5 4 5 6 8 9 0 0 1 2
J a M M S N J M M S N J M M S N J M M 27 133 139 145 151 157 164 169 176 182 188 194 200 206 212 218 224 230 237 243 249 255
41 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Mexi co CHINA ROW

Top Export Destinations
7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
Chi na Mexico Vi etna m Korea, South Ca nada Thai l a nd Irel a nd Ja pa n Indones i a Turkey

2013 YR 2014 YR 2015 YR 2016 Annual i zed

 Top Export Destinations
COUNTRY 2013 YR 2014 YR 2015 YR Jan/Jul 2015 Jan/Jul 2016 % Change Net Change 2016 Annualized
World Total 9,669,815 11,283,749 12,701,102 7,223,395 6,454,815 -11 -768,580 11,065,397
China 4,441,647 4,333,451 6,462,267 4,301,469 1,698,434 -61 -2,603,035 2,911,601
Mexico 1,280,554 1,577,727 1,650,235 920,082 1,097,291 19 177,209 1,881,070
Vietnam 357,396 638,396 650,460 263,776 560,611 113 296,835 961,047
Korea, South 394,900 690,046 636,523 220,533 415,003 88 194,470 711,434
Canada 474,912 456,538 512,229 276,364 296,929 7 20,565 509,021
Thailand 265,974 363,092 398,756 201,408 344,789 71 143,381 591,067
Ireland 225,421 260,518 248,281 117,178 158,344 35 41,166 271,447
Japan 384,432 488,178 241,031 135,461 172,215 27 36,754 295,226
Indonesia 236,799 282,941 230,565 119,736 215,692 80 95,956 369,758
Turkey 289,358 498,412 207,914 28,904 448,336 1451 419,432 768,576
Taiwan 237,657 243,138 196,053 99,063 126,031 27 26,968 216,053
UK 96,096 130,386 152,177 54,087 85,431 58 31,344 146,453
Spain 12,716 84,154 150,743 14,426 54,724 279 40,298 93,813
Israel(*) 131,733 179,558 124,148 16,400 104,211 535 87,811 178,647
Colombia 93,727 141,320 123,892 64,207 77,947 21 13,740 133,623
Morocco 120,336 94,422 110,080 60,596 103,929 72 43,333 178,164
Philippines 61,581 116,517 106,483 49,866 78,644 58 28,778 134,818
Opportunity
With Anti Dumping and CVD Duties China will not import
historical volumes DDGS
New Chinese corn polices may have lasting impacts lowering
their DDGS demand
Other countries will have the opportunity to import DDGS at
competitive prices and lower ration costs
 NO HEAT
COLD COOK

Grains Building

Solubles

Silo Storage Segregation

 Standard Production: Jet
Cooker
In the standard production process, the grain mash must go through a cook process, to raise the slurrys
temperature. In the Primary Liquefaction Stage, slurry is then pumped through a pressurized jet cooker at 221F
and held for 5 minutes. The mixture is then cooled by an atmospheric or vacuum flash condenser. After the flash
condensation cooling, the mixture is held for 12 hours at 180190F to allow the enzymes time to catalyze
fermentation
 POET BPX: Cold Cook
Fermentation
POETs patented BPX refining process converts starch to ethanol without cooking. This allows us to achieve
improved nutrition due to less heat damage. As a result, Dakota Gold BPX stands apart with uniform particle
size, high palatability and nutrient value proven to maximize feed utilization and performance. Unique physical
characteristics include higher density, easier pelleting, and most importantly, enhanced flowability.
 Rotary Drum Dryer System
A rotary drum dryer is a large rotating cylindrical tube that his heated by a gas stream. Wet distillers grain enters the dryer, and as
the dryer rotates, the material is lifted up by a series of internal fins lining the inner wall of the dryer. The ddgs cycles through the
drum dryer for 40-50 minutes. With this dryer system the product is exposed to heat for an extended period of time and the DDGS
is in direct contact with the hot interior surface of the drum. This heat exposure has negative impacts on the nutrient digestibility.
 Ring Dryer System
(Used at POET Plants)
Poets a ring dryer system is a natural gas fired forced air chamber that feeds hot air through a ring system in which
the DDGS particles circulate until they reach the desired moisture level and then are cooled and transferred to storage.
The total drying process is under 5 minutes with this technology.
 Heat and the Maillard Reaction
The Maillard Reaction is a browning which involves a
reaction of simple sugars and amino acids.

The speed of reaction increases exponentially with

temperature.

Heat breaks down (damages) triglycerides and damages

the bond structure (Fat, fiber, & protein less digestible)

Lysine is the most sensitive amino acid to heat damage

and the extent of heat-damage and varies among DDGS
sources

Essential nutrients escape the digestive tract and

Heat damage starts unaccusable to the animal (manure)
to occur as early as
6.5 minutes
 Impact of Drying System on DDGS
Due to the variety of drying technologies, the design, and their operating conditions,
the nutritional profile of the DDGS is fairly variable.

The main factors affecting DDGS product quality during the drying process include :
Dryer operating temperatures
Product Residence time in the drying system
Quality of WDG and Solubles
Dryer Configuration

The effects of drying on protein quality (lysine digestibility) of the DDGS is dependent
primarily on operating temperature and product residence time in the Dryer.

Optimal product quality is achieved with shortest residence time and low operating
temperatures in the drying process.
Crude Fat (Gross Energy) vs. Metabolized Energy

**Non-digestible Crude Fat,

Fiber, & Protein**

**True Value of Digestible

Nutrients**
 Variability across the Industry

Biological process vs. mechanical process Lack of quality control measures in place
Not all plants are built are the same. Corn quality can vary by geographic region
Various Technologies form different eras Most producers primary focus is making
Different management & production ethanol. DDGS is the by-product
processes used throughout industry
Dakota Gold Consistency
Same technology at all plants
Designed and constructed by POET
Centralized plant management group
7,000 control points tracked every second
Onsite lab testing and segregation based on quality specs.
 Storage Segregation
Flat Storage Silo Storage

Production

Lab Analysis

Commodity DDGS DDGS

 Container Loading Process
1.Produced at a POET Plant 2. Loaded into Truck/Railcar 3. Offloaded at Transloader

4. Transferred into Container 5. Packaged and Sealed 6. Loaded on Vessel

Additional Services: Fumigation, Container Liners, Mold Inhibitor, Desiccants, Totes, Etc.
 Loading/Distribution Points
3rd Party Exclusive Transloading
Contracts
Strict segregation and cleanout policies
to eliminate cross-contamination
Sealed and traceable process from
plant to destination port
Multiple sampling & lab testing
checkpoints
 VOCCs- Ocean Carriers
Direct contracts with major shipping lines Versatility in routing options
Experienced in-house export documentation team Access to containers during periods of limited equipment
 Nutrition Value of DDGS
& Mycotoxin Management
Dr. Kevin Herrick
Technical Services Director
POET Nutrition
 Third-party Testing
Moisture NFTA 2.2.2.5
Crude Protein AOAC 927.43
Crude Fat AOAC 2003.06 (petroleum
ether)
Acid Detergent Fiber Ankom
Crude Fiber AOAC 962.09
Ash AOAC 942.05
Neutral Detergent Fiber Ankom
Minerals *ICAP
Amino Acids *HPLC-PCD
Mycotoxins Chromatography including
*GC and HPLC
Starch Enzymatic, modified Megazyme
Monthly Proximate to SGS
Monthly Minerals to Foundation
AOAC 954.02 (acid Monthly Amino Acids to Foundation
hydrolysis) is not
Monthly Mycotoxin to Trilogy
accurate
Monthly Starch to Soliton
*ICAP Inductively Coupled Argon Plasma spectroscopy
*HPLC High Performance Liquid Chromatography
*PCD Post Column Derivatisation
*GC Gas Chromatography
Segals Law:
A man with a watch knows
what time it is. A man with
two watches is never sure.
Consistency
What About Fat
Ethanol industry has
moved towards more fat
extraction
PERCEPTION that
reduced fat has a major
impact on energy
Reduced-fat DDGS
What is reduced-fat DDGS?
Reduced fat 5 to 9% fat
De-oiled 3 to 4.99% fat

Why is oil extracted?

Better market
$0.25 per pound for distillers corn
oil compared with $0.06 per
pounds for DDGS
 DDGS and Fat Digestibility
90%
Fat (%) 80%
DDGS Source Fat (%) Digestibility
70%
Commodity 1 13.34 59.82
60%
Commodity 2 10.41 55.85
50%
Commodity 3 9.11 46.32
40%
POET 1 8.01 75.95
POET 2 6.99 73.47 30%

POET 3 11.38 81.25 20%

10%
6 sources of DDGS 0%
13.34% 10.41% 9.11% 8.01% 6.99% 11.38%
Digestibility varied between sources
Commodity 1 Commodity 2 Commodity 3
POET samples had greater digestibility
Crude Fat (DM Basis)

1
Kerr et al., (2015)
Fat vs. Gross Energy

Fat content
of DDGS is
related to
Gross
Energy

Kerr, et al., 2013

Fat vs. Digestible Energy

Kerr, et al., 2013

R2 value is the percentage of variation that can be explained by ether extract.
Only 29% of the variability in ME is related to fat content.
R2 value is the percentage of variation that can be explained by neutral detergent fiber.
Over 57% of the variation in ME is related to fiber content.
Dakota Gold Pelletability
- Dakota Gold produces a
premium quality pellet as
compared to commodity
DDGS
- Pellet containing 30% Dakota
Gold had the best
performance
Source PDI
88.0
Commodity DDGS 82.8
P-value 0.0051
Commodity DDGS
(Yoder et al., 2016)
100% DDGS Pellets shown
Overview of Mycotoxins
Prevalence can be difficult to determine
Testing and sampling variability
Industry reporting
Typically, only suspect samples are sent for
analysis
As a result, prevalence may be assumed to be
greater
Detectable level vs. toxic level
Mycotoxins may be present at low concentrations

Results need to be carefully

interpreted
Specific Mycotoxins
Mycotoxins guidelines based on
entire diet
Multiple ingredients may contribute
Inclusion amount is critical

Some species are more susceptible

Stage of production is important
Young animals, gravid animals, and high
producing are typically more sensitive
Variety of symptoms
 *

*No FDA guidelines have been

determined for ochratoxin, T-
2, or zearalenone. The
advisory levels are suggested
thresholds.
POET Quality Control
Step-up/Step-down approach
Increased testing at beginning of
harvest
If mycotoxins are detected, testing
frequency is increased
If mycotoxins are not present,
testing frequency is maintained or
decreased
Periodic testing done at all times
Internal and external testing done
on both corn and DDGS