Biofuel co-products as livestock feed - Opportunities and challenges

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An assessment of the potential demand for DDGS in Western Canada: institutional and market considerations 471FIGURE 2Wheat DDGS as a co-product of the ethanol production processGRAIN Cleaning Dry GrindingSLURRYWaterAlpha-amylaseOther enzymesHeat exchangesMASHCookerLiquefactionYeastAntibioticH 2SO 4/H 3PO 4CO 2SaccharificationFermentationBEERBeer wellETHANOLSieveCentrifugeWHOLESTILLAGEDistillationTHINSTILLAGEWETDISTILLERSGRAISMODIFIED WETDISTILLERS GRAINWITH SOLUBLESEvaporatorDryerDRIEDDISTILLERSGRAINCONDENSEDDISTILLERSSOLUBLESWET DISTILLERSGRAIN WITHSOLUBLESDRIED DISTILLERSGRAIN WITHSOLUBLESSource: Nuez, 2010, adapted from Rausch and Belyea, 2006.TABLE 3Baseline and performance data summary of a DDGS feeding trialControl20% wheatDDGS40% wheatDDGS20% maizeDDGS40% maizeDDGSPSEMP valueInitial weight (kg) 375 376 377 376 376 0.8 0.7Slaughter weight (kg) 654 649 648 652 653 2.28 0.34Average daily gain (kg) 1.62 1.63 1.73 1.66 1.68 0.03 0.13Dry matter intake (kg/day) 10.4 10.2 10.9 10.2 8.8 0.11
472Biofuel co-products as livestock feed – Opportunities and challengesgain feed ratio improved over the control and other treatmentgroups. There were no differences in carcass qualityin the DDGS-fed animals relative to the control diet. Thistrial illustrates that both maize and wheat distillers graincan be used in beef rations at up to 40 percent inclusionrate with no deleterious effects on animal performance orcarcass characteristics relative to the commonly fed barleycontrol ration.Poundmaker Agventures Inc. is the only integrated ethanoland feedlot facility in Canada and is the only feedlot usingwet mash and thin stillage as their feed input. PoundmakerAgventures is located in Lanigan, Saskatchewan, and operatesa small 12 million litre facility, which produces twostreams of products – thin stillage and wet distillers grain –that are fed to the beef in the feedlot on site. Poundmakerproduces approximately 250 000 litres of thin stillage perday. Thin stillage is the water recovered from centrifugationof the whole stillage. It has low levels of solids, approximately8.5 percent; the thin stillage is piped to the feedlot 1000 maway and distributed through an additional 1000 m to thewater bowls in the feedlot. The approximately 8 000–16 000animals receiving thin stillage need no supplemental water.Poundmaker also produces 50 tonne of wet distillers graindaily, with 23–24 percent solids. The wet distillers grain arepicked up by a feed truck and directly mixed with barleysilage at 10–20 percent of the ration.OPPORTUNITIES FOR DEVELOPMENT OF THEDDGS MARKET IN WESTERN CANADAStudies such as Walter et al. (2010) have illustrated theimpact of maize or wheat DDGS on both animal performanceand meat carcass quality. With the understanding ofthe biological indicators, livestock owners can begin tomake decisions regarding the inclusion of DDGS in livestockrations based on the economics of the DDGS ingredient.Least-cost formulation is used to determine when specificingredients are brought in or taken out of a ration. Costof the ingredient, plus cost of transportation and ability tostore ingredients, are included in the economic decisions.Transportation logistics influence strongly the potentialrange of distribution of DDGS. Most imported maize-basedDDGS from the United States is transported by railway.Transshipment sites for transfer of DDGS from rail to truckare needed as feedlots do not have the ability to receiveingredients by rail. In Western Canada, several transshipmentsites are located in southern Alberta. These sitesreduce transportation costs compared with trucking inDDGS. As a result, more maize DDGS is used in southernAlberta than in central Alberta or Saskatchewan.CHALLENGES OF CREATING NEW MARKETSIn a competitive marketplace made up of many informedbuyers and sellers, a market exchange is an institution thatvery effectively governs the production and consumption ofproducts. The prices generated in a market system createAdam Smith’s ‘invisible hand’ to match the marginal cost ofproviding a product to the marginal value of that productto industry. In a great many instances in the market place,a simple exchange of products at an agreed upon price is alow-cost transaction that provides the correct incentives forthe buyer and sellers. When the marketplace fails to operatein a manner such that the marginal benefit is not equalto the marginal cost of the action, then a market failureis said to exist. Market failures can be addressed throughgovernment, collective or private actions.A market failure that has attracted attention in theinvestment literature is referred to as the hold-up problem.The hold-up problem, according to Milgrom and Roberts(1992), is “the general business problem in which eachparty to a contract worries about being forced to acceptdisadvantageous terms later, after it has sunk an investment,or worries that its investment may be devaluedby the actions of others.” The hold-up problem may beinduced by other forms of market failure, but deals morespecifically with the investment decision. Because the holdupproblem often prevents otherwise advantageous investmentit can create market failures that are real obstacles toindustry development, such as the development of the newfeed markets for DDGS in Western Canada.There is a relationship between the presence of transaction-specificand asset-specific investments and thepotential for ex post hold-up (Williamson, 1983; Grossmanand Hart, 1986; Tirole, 1988; Choate and Maser, 1992).With asset-specific (specialized) investments, the value ofthe asset in its specific use is far greater than its value inthe next-best use. In order for the initial specific investmentto be undertaken, the real rents to each party (returnsin excess of ex ante investment) must not be negative.However, when one party’s ex post opportunity cost isreduced to the initial investment, its bargaining power isalso reduced, and it is less likely for this party to cover theinitial investment. This party will recognize the potential forex post hold-up and will therefore be unwilling to incur theex ante investment cost. Hence, if the initial investment ishigh enough relative to the respective ex post opportunitycost, the initial investment will not be undertaken by thatparty and market failure will occur since the specific transactionis Pareto superior to all alternative transactions.Addressing market failures through institutionsInstitutions encompass a set of rules, both formal (e.g. statutes)and informal (e.g. norms), that constrain the behaviouralrelationship among individuals or groups (North,1990). Institutions are effective rules, not nominal rules,with an emphasis on enforcement (Eggertsson, 1994).They can be established, enforced and policed, either by
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BIOFUEL CO-PRODUCTS AS LIVESTOCK FE
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Recommended citationFAO. 2012. Biof
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vco-products to swine - Feeding cru
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viiCHAPTER 22Use of Pongamia glabra
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ixPrefaceHumans are faced with majo
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xiiCBMCBSCCDSCCKCDOCDSCFCFBCFRCGECI
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xviPPbPCVPDPEMPFADPhePJPKCPKEPKMPKO
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xviiiWBPWCGFWDGWDGSWDGSHWPCWTWWWNSK
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10Biofuel co-products as livestock
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35Chapter 3Impact of United States
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Impact of United States biofuels co
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101Chapter 6Hydrogen sulphide: synt
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Hydrogen sulphide in cattle fed co-
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155Chapter 8Utilization of crude gl
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Utilization of crude glycerin in be
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209Chapter 11Co-products from biofu
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Co-products from biofuel production
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275Chapter 15Sustainable and compet
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Sustainable and competitive use of
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291Chapter 16Scope for utilizing su
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Scope for utilizing sugar cane baga
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303Chapter 17Camelina sativa in pou
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Camelina sativa in poultry diets: o
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311Chapter 18Utilization of lipid c
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Utilization of lipid co-products of
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351Chapter 21Use of detoxified jatr
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379Chapter 22Use of Pongamia glabra
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403Chapter 23Co-products of the Uni
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Co-products of the United States bi
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523Contributing authorsSouheila Abb
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Contributing authors 525for the Fee
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Contributing authors 527Friederike
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Contributing authors 529Sustainable
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Contributing authors 531During the
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Contributing authors 533(Hons.) and
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