wheat field

DDGS in Livestock Feeds

By Dr. Pat Brown

The principal end products from the fermentation of corn to ethanol at dry-mill ethanol plants are Distillers Dried Grains with Solubles (DDGS), Carbon Dioxide (CO2), and, of course, ethanol. Of these, DDGS is the product of economic interest to livestock producers. From a bushel of corn, an ethanol plant will produce 17 pounds DDGS, along with an equal amount of carbon dioxide. Advances in fermentation efficiency over the last decade have increased ethanol yields to slightly more than 2.8 gallons per bushel of corn.

In the drought-challenged 2012-2013 crop-year, 43 percent of U.S. corn stocks were used to make ethanol to blend with gasoline.

As required under the Renewable Fuels Standard (RFS, 2005) and the Energy Independence and Security Act (EISA, 2007), this represents a three-fold increase in the amount of corn diverted to ethanol production since 2005. To meet mandated ethanol usage, almost all U.S. gasoline is now blended with 10% ethanol (E-10). An unforeseen problem, however, is looming for the ethanol industry. Gasoline consumption is declining in this country (Figure 1), and the industry faces the unexpected arrival of the “blend wall.” The onset of the blend wall points to a saturated market and is an indication that our ability to blend mandated amounts of corn-based ethanol into gasoline is not likely without consumer and automaker acceptance of E-15 blends (15% ethanol and 85% gasoline) and flex-fuel vehicles (E-85: 85% ethanol and 15% gasoline).

Figure 1.

DDGS in Livestock Feeds February 2014_Page_1

Data from U.S. Energy Independence Agency

In 2013, consumers in the United States used 133 billion gallons of gasoline, almost all of which contained 10% ethanol.

For 2014, Dr. Robert Wisner, Biofuels Economist at Iowa State University, estimates that “the maximum feasible domestic ethanol market is approximately 13.0 billion gallons.” This is considerably less than the 14.4 billion gallons mandated for 2014 by the Energy Independence and Security Act. In large part, the early arrival of the blend wall occurred because gasoline use in the U.S. has declined since 2008, limiting the amount of ethanol that can be blended into E-10.

It is expected that gasoline consumption in the U.S. will continue to decline as government mandates to increase the average fuel efficiency of cars and light-trucks (35.5 mpg by 2016 and 54.5 mpg by 2025) take effect. Also, the required increases in the production of cellulosic ethanol and advanced biofuels will further burden the market with ethanol. [To date, it should be noted that commercial production of cellulosic ethanol has met with limited success.] Still, the RFS requires the production of 36 billion gallons of renewable fuels in 2022, with corn-based ethanol capped at 15 billion gallons per year after 2015. As the consequences of these regulations reach the fuel pump, one may ask “Is it possible to blend the mandated amount of ethanol into E-10?” A reasonable response would be “Not likely.” Thus, unless efforts to raise the blend wall are successful, the demand for corn-based ethanol may very well decline.

This shift in future demand has clear implications for livestock producers. Chief among many is that as the blend wall is reached the growth of corn-based ethanol will come to an end, and the ethanol industry will no longer be the major determinant of corn prices. And, as we have seen this past fall, corn prices will decline if supply increases.

What, then, about the value of DDGS to livestock producers?

In years’ past, growth and feed efficiency of pigs fed diets balanced with DDGS would compete with that of pigs fed corn-soy diets. With DDGS priced at 80% to 90% of corn, these diets were very cost-effective. Today, however, DDGS is priced at 120% to 150% that of corn (due to very strong export demand). And with ethanol plants now extracting between 15% and 60% of the oil in DDGS, there is a predictable loss in net energy from reduced-oil DDGS (Figure 2). Still, when balanced against expensive soybean meal and affordable synthetic amino acids, reduced-oil DDGS can improve margin over feed costs when compared to corn-soy diets.

Figure 2

DDGS in Livestock Feeds February 2014_Page_2

Data from Kansas State University, 2012

In Table 1, the projected feed cost savings are estimated for pigs weighing 50 to 285 pounds when fed diets balanced with 25% DDGS. In our example, we measured the impact of DDGS containing either 8.5% oil or 6.0% oil on margin. Because DDGS tends to be limiting in digestible lysine, these diets respond well to significant additions of crystalline lysine. It is important to note, however, that aggressive additions of crystalline lysine may aggravate a tryptophan deficiency, which can be corrected with additions of either soybean meal or tryptophan. For this illustration, the projections are based on diets without supplemental tryptophan. Corn was priced at $4.50 per bushel, soybean meal at $500 per ton, and DDGS at $200 per ton. The carcass price was set at $0.85 per pound.

Table 1. Cost savings from diets balanced with 25% DDGS.

DDGS in Livestock Feeds February 2014

In our model, DDGS containing 8.5% oil and priced at 125% of corn proved cost-effective. Its value would have increased more if synthetic tryptophan were included in the model, which would have permitted greater use of crystalline lysine. On the downside, the low-energy content of DDGS containing 6.0% oil did not compete well in our analysis. We believe that competitively-priced DDGS with appropriate levels of dietary oil provides value to grow-finish producers. Producers should be aware that there is the possibility for reduced performance exists when feeding diets balanced with low-oil DDGS. We welcome your questions on the value of DDGS in your finishing program. AK