CHICAGO (Reuters) - Tate & Lyle, a British maker of sweeteners and starches, on Thursday said quality problems with the U.S. corn harvest, primarily due to aflatoxin, the byproduct of a grain fungus, were raising costs and forcing changes to the firm's buying program.
Aflatoxin is associated with a mold that thrives in hot and dry conditions, and it emerged in unusually high levels in the heart of the U.S. Corn Belt this autumn after the worst drought in half a century decimated the corn harvest.
Aflatoxin can cause liver disease and is considered carcinogenic. Processing contaminated corn can raise the concentration level of the toxin, threatening livestock that feed on the by-product.
Under U.S. Food and Drug Administration guidelines, certain types of animal feed can contain an aflatoxin concentration of up to 300 parts per billion (ppb). Human foods must contain less than 20 ppb.
To avoid problems, corn processors and ethanol producers in heavyweight corn states including Illinois and Indiana have been "importing" clean grain from states like North Dakota and Mississippi, which are typically minor players in corn production.
"While the presence of aflatoxin resulted in the sale of a greater proportion of our CGM (corn gluten meal) and CGF (corn gluten feed) in lower value markets in the first few weeks following the harvest, we have taken steps to adjust our corn sourcing program," Tate & Lyle said in a semiannual earnings statement.
"Although significant efforts are under way to mitigate the impact of aflatoxin, and we continue to monitor the situation closely, based on what we know today we believe it will result in a small increase in net corn costs for the remainder of the financial year and through to the next harvest," the company said.
The company posted adjusted pretax profit for its first half of 179 million pounds ($286 million), up 2 percent. First-half sales rose 7 percent to 1.63 billion pounds, despite uncertainty around the wider economy and corn quality and pricing.
(Reporting by Julie Ingwersen; editing by Jim Marshall)
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