Feed Formulators Turn to Distillers’ Grains to Replace Corn
April 26, 2011
By: Roy Leidahl
Is the U.S. Playing Dirty with DDGs?
The Feed Use Group is Blinking
Distillers Byproduct Boosts Bad-Hay Nutrients
Demand for dietary energy in feed rations is pulling distillers’ grains into feed formulas in place of corn, but also displacing some soybean meal in the process.
“The biggest product distillers’ grain is replacing is actually corn,” said Jim Ringo, director of marketing for distillers’ dried grains and corn oil at Renewable Products Marketing Group, LLC, Shakopee, Minn.
Recent weakness in soybean and soybean meal prices relates more to South America's crop than to competition from distillers’ grains.
May soybean meal futures climbed since June to their highs in early February, but backed off since then, and December futures are moving sideways in recent weeks. Soybean futures followed similar but more moderate patterns.
May corn futures slipped from their highs set earlier this month, while December futures kept climbing.
Distillers’ grains carry significantly more protein than corn—about 30 percent for the dried, processed product versus 8 or 9 percent for corn—so distillers’ grains replace some protein that might have come from soybean meal. However, “In today's market environment, the shortage is for carbohydrates and fats,” said Ringo.
When nutritionists formulate feedlot, swine, or poultry rations using distillers’ grains in place of some corn, “They're not necessarily thinking about displacing protein,” he said. However, they remove some soybean meal to balance the rations.
In dairy rations, distillers’ grains do replace soybean meal or other proteins, and the energy and fiber from distillers’ grains provide a secondary benefit, said Ringo. Dairy nutritionists for many years have limited the levels of distillers’ grains in rations because corn oil in the processed product could depress butterfat content in milk. However, many ethanol plants now extract that oil, so Ringo expects more distillers’ grains will go into dairy feeds.
Close to saturation
Much of the increase in feeding products from ethanol plants occurred in past years, said Mark Ash, an oilseed specialist at USDA's Economic Research Service. “We're probably getting close to saturation levels for how much distillers’ dried grains you can incorporate into feed rations in the United States,” said Ash. “It's probably replacing more of the corn in rations now.”
However, soybean meal has competition from increased supplies of several competing ingredients.
“We certainly have a lot of supply of cottonseed this year and that has provided some competition for soybean meal,” said Ash. USDA estimates the U.S. supply of cottonseed from the 2010 crop at 3.29 million tons, up nearly two-thirds from two years ago. But cottonseed prices have risen since last summer to one-year highs in some U.S. markets this month. August-January imports of canola meal from Canada increased 42 percent from a year earlier.
Prices for many grain-based feed ingredients also climbed while soybean and meal prices softened in recent months. Midwestern corn gluten feed prices soared from $40 to $60/ton in railcars last May and June to $140 to $165 last week. Eastern Iowa dried distillers’ grain prices shot from about $100 per ton last June to $205 to $212 in recent weeks.
Less domestic soy, corn demand
Domestic feed demand for soybean meal and corn have both declined in recent years. USDA expects U.S. soybean meal demand to reach 30.5 million tons this year, off slightly from last year, continuing the decline from the peak of nearly 31.2 million tons in 2006-07. Domestic corn feed and residual use peaked at 6.16 billion bushels in 2004-05 and is projected at 5.15 billion bushels this year, about steady from last year.
Meanwhile, U.S. distillers’ grains production soared from 9 million metric tons in 2005 to 32.5 million in 2010, reported the Renewable Fuels Association. While beef and dairy cattle have provided the major domestic markets, USDA reported that exports surged from about 1 million metric tons in 2005 to nearly 5.5 million tons in 2009.
Distillers’ grains output moderating
Growth in distillers’ grain production is easing, wrote USDA economists in December. Linwood Hoffman and Allen Baker projected that production will increase from 33.3 million metric tons in 2009-10 to 38.6 million metric tons in 2019-20.
Average dried distillers’ grain prices had run at a premium to corn prices for the decade through August 2006, but in the past four marketing years they have averaged a discount to corn, reported Hoffman and Baker. They said that as distillers’ grains became more of an energy feed, soybean meal prices lost some of their past connection to distillers’ grains prices.
In a beef cattle feedlot distillers replaces 20% of the corn and all the protein which is cheaper than CSM or SBM.
In a dairy ration you can not exceed 5% fat. So, you need distillers from a wet grind plant that removes the corn oil.
USDA is totally oblivious of this on their Corn S&D reports.
USDA needs to provide a Corn Distillers S&D just like they do for SBM.
Exports of distillers are soaring.
Corn ethanol does NOT raise the price of food. When distillers replaces 20% of the corn and supplies all the protein cheaper than CSM or SBM, it makes beef cheaper in the grocery store than if you had to use 20% more corn and higher priced protein.
I've long supporterd DDG's and Ethanol and still do but in my mind it is NOT a game changer. Right now, DDG's and SBM on a price per point of CP are basically even.....take the fat out and my guess is DDG's will be higher in $/CP. DDG's will only increase in price as SBM increases in price.....and will go up in price as corn goes up in price as ethanol plants will look to recover the cost of corn in the DDG's.
48 you said--Corn ethanol does NOT raise the price of food. When distillers replaces 20% of the corn and supplies all the protein cheaper than CSM or SBM, it makes beef cheaper in the grocery store than if you had to use 20% more corn and higher priced protein.[/QUOTE]
So you are saying feeding DDG's instead of corn makes beef cheaper? I would agree with that, but how does that mean ethanol doesn't raise the price of food? If I had a bushel of corn and feed it to a hog would that be just as much feed as if that same bushel went to a ethanol plant and you recieved the left over bushel in DDG's?
Always remember, you can't create energy. 1 bushel of corn has X number of calories/btu's/whatever unit of measure you want to go with. 1 bushel of corn producers, what's the number now, 2.8 gal or something like that of ethanol? So take 2.8 gal of ethanol worth of btu's/cal's/whatever plus whatever losses from refining from your original bushel and what you have left is how many btu's/cals of distillers and whatever else.
In a totally free market all that would matter is if ethanol could be refined cheaper than fossil fuels. That's basically it. There are tons of variables, but the convenient thing about free markets is that the market would figure it out a lot easier than any mathematician or professor.
If you happen to be a farmer who has planted more cotton and soybeans than corn you have been a loser from ethanol sector as a result of DDG impact on domestic demand for soymeal and cottonseed meal. Each ton of 27% protein DDG that replaces a ton of 8% protein corn in a feed ration reduces the demand for soymeal by 0.6 tons. That is main reason U.S. soymeal ddemand has fallen by 3.2 mmt in last 5 years.
With current price of DDG's and SBM it is a almost a wash right now which is a cheaper protein source. The only thing in DDG's favor right now is that it is high in P. But if you have other feeds high in P, and you don't need supplemental P, SBM is CHEAPER to feed even at these high prices. $240/T for DDG's to expensive, compared to SBM @ $380/T, unless you also want a source of P.