Demand for distiller’s grain, a byproduct of distilling corn into ethanol, will continue to grow domestically and abroad as livestock producers turn to the feed as a cheaper alternative to corn, analysts said.
And with the ethanol industry gearing up for a better year in 2010 after the financial crisis of 2008 triggered by corn prices hitting record highs, more distiller’s grain should be making its way into the U.S. livestock sector.
“If we are going to ramp up (ethanol production), we have to find a home for DDGS (dried distiller’s grain with solubles),” said Darrel Good, extension economist at the University of Illinois.
“We will export some of those but domestic feeding will have to absorb a big chunk of that,” Good added.
The U.S. Agriculture Department forecast ethanol production to rise by 13.5 per cent in the 2009 crop year that began Sept. 1, while corn prices could continue to rise as fuel blenders compete for a larger share of a likely record U.S. corn crop.
A third of the corn used in ethanol production comes out as (DDGS), while the feed costs roughly 22 per cent less than corn.
The average price for distiller’s grain last month in Iowa was US$116.25 per ton, compared with $126.25 a year ago, USDA said.
Demand for distiller’s grain is growing as domestic cattle and hog producers, seeking to cut feed costs amid shrinking profits, boost the amount of DDGS in feed formulations.
Some hog producers have increased the amount of distiller’s grain in feed formulations to as much as 20 per cent from about 10 per cent, said Darrell Mark, extension livestock marketing specialist at University of Nebraska-Lincoln.
“The demand has maybe been a little better from the hog producer because their losses have been so huge,” Mark said.
Exports of distiller’s grain are expected to increase to six million tonnes from five million tonnes this crop year, said Dan Keefe, manager of international operations for DDGS at the U.S. Grains Council.
“DDGS has protein, fat and fibre, and it’s a good substitute for soy protein, canola protein, fishmeal, even bone meal,” Keefe said. Distiller’s grain exports may continue to increase in the coming years as more importing countries learn of its benefits, he said.