Biofuel co-products as livestock feed - Opportunities and challenges

467Chapter 26An assessment of the potential demand forDDGS in Western Canada: institutional andmarket considerationsColleen Christensen, 1 Stuart Smyth, 2 Albert Boaitey 2 and William Brown 21Feeds Innovation Institute, University of Saskatchewan, Canada2Department of Bioresource Policy, Business and Economics, University of Saskatchewan, CanadaE-mails for correspondence: colleen.christensen@usask.caABSTRACTThe rise of the ethanol industry in Western Canada during the start of the twenty-first century has precipitated thedevelopment of market opportunities for co-products from the ethanol industry. Previously, dried distillers grainwith solubles (DDGS) was imported from the United States for use in the beef feedlot industry, but the potentialfor more regionalized, if not localized, production now exists. As with the development of any new market, thereare challenges and opportunities. This chapter provides an overview of the development, potential and challengesfacing the DDGS market in Western Canada.INTRODUCTIONThe Canadian grain-based ethanol industry has been growingconsistently over the past decade (Coyle, 2007). Thedriver for this growth comes largely from provincial andfederal government subsidies for the development of newbiofuels, and since the ethanol plants are based on the useof grain feedstocks, they are located in areas of high wheatproduction. A major consequence of this expansion is theproduction of dried distillers grain with solubles (DDGS)—afeed ingredient that can be incorporated into livestock feedrations as supplemental protein or an energy source. Forlivestock producers in Western Canada, the availability ofdistillers grain presents enormous opportunity. The region’shigh livestock numbers and abundance of grain offer significantpotential for the production of ethanol and themarketing of distillers grain. Already, seven out of the fifteengrain-based ethanol producers in Canada are locatedin the region. With two more proposed plants to be locatedin Alberta, the total regional ethanol production capacitycould increase to 704 million litres/year from the current514 million litres/year (CRFA, 2010a). This implies anincreased supply of domestically produced distillers grain.Under the present circumstance, an understanding ofthe DDGS market in Western Canada is critical for bothsuppliers and consumers (primarily beef feedlots). For thelatter, an in-depth understanding of market trends andstructure would enhance the potential to reap full benefitsfrom the availability of the feed ingredient. The formermight reap even greater benefits as information on marketstructure and trends could, in the short term, enhance currentmarketing efforts, and the overall competiveness andviability of the enterprise in the long term.For livestock producers in Western Canada, the proximityto the supply of distillers grain from the United Statescould make the feed ingredient a critical component ofthe feed market. The United States is the world’s largestproducer of distillers grain. The production of the ethanolco-product has increased dramatically over the last decade,from 2.7 million tonne in 2000 to 30.5 million tonnein 2009 (CRFA, 2010a). It is projected to reach 88 milliontonne by 2016, based on assumptions of aggressiveindustry expansion (Tokgoz et al., 2007). This high level ofproduction has resulted in the situation where the internationalfeed market is gradually gaining prominence as animportant market for the use of DDGS as a feed ingredient.In 2009, over 5 million tonne of distillers grain wereexported, accounting for approximately 15 percent of totalproduction (USDA-FAS, 2011). Canada and Mexico are themain markets for the product.Over time, Canada has emerged as an importer of maizedistillers grain. A livestock production system that mimicsthat of the United States, the absence of tariffs under theNorth American Free Trade Agreement (NAFTA) and theoption to ship by rail has facilitated the movement of thecommodity from the United States to Canada (Fox, 2008).This is aside from market factors such as the recent highprices of traditional feed grains. In 2008, imports of UnitedStates distillers grain were nearly 800 000 tonne, up over475 000 tonne from 2007 (USDA-FAS, 2011). Figure 1shows the trend in Canadian distillers grain imports. Imports