Biofuel co-products as livestock feed - Opportunities and challenges

44Biofuel co-products as livestock feed – Opportunities and challengesTABLE 3Historical break-even price (US$ per tonne) comparison forusing DDGS in diets for different animal speciesEarly 2000s Mid-July 2011Assumptions:U.S. #2 Corn 79 306Soybean meal (48% protein) 193 376DDGS break-even values:Dairy – lactation 126 290Beef – feedlot 119 297Swine – grower-finisher 106 315Poultry – layers 114 262Notes: Data based on a 10% dietary inclusion rate and central Iowaprices. Source: Land O’ Lakes Purina Feed LLC, unpublished data.TABLE 4Comparison of break-even price (US$/tonne) of DDGS indiets for different animal species in three geographicalareas of the United States based on maize and soybeanmeal prices in mid-July 2011CentralIowaSouthCarolinaPennsylvaniaAssumptions:U.S. #2 Corn 306 356 351Soybean meal (48% protein) 376 437 441DDGS break-even values:Dairy – lactation 290 357 379Beef – feedlot 297 346 338Swine – grower-finisher 315 332 335Poultry – layers 262 322 362Notes: Calculations are based on a 10% dietary inclusion rate. SOURCE:Land O’ Lakes Purina Feed LLC, unpublished data.primary protein source). During this time, DDGS was usedmore as a protein supplement rather than as an energysource in animal feeds. However, as the price of maize(primarily an energy source) increased to 80 percent of theprice of soybean meal, and because DDGS is primarily anenergy source in animal feeds, it changed the relative valueof DDGS among these animal species. Currently, DDGS hasthe highest value in swine diets, followed by beef, dairyand poultry.There are also geographical differences in relative valueof DDGS for various animal species (Table 4). These breakevenvalues are based on the nutrient value of the DDGSat the point of animal consumption using mid-July 2011maize and soybean meal market prices, 10 percent dietaryinclusion rate and typical assumptions on animal performance,diet digestibility, etc. The values do not reflect marketing,processing and transportation cost, nor the competitiveeffect of other ingredients in the market place, all of whichhelp determine the market value of DDGS. Currently, incentral Iowa, DDGS has the highest value in swine andbeef cattle diets; in South Carolina it has the highest valuein dairy and beef cattle diets; and in Pennsylvania it has thehighest value in dairy and poultry diets. The regional differencesin break-even price of DDGS observed in this comparisonwere largely determined by availability and marketprice of other competing ingredients at each location, andby restricting the dietary inclusion level to 10 percent ofthe complete feed for all species. Higher inclusion levels ofDDGS in diets results in different break-even values to thoseused in this comparison.On a volume basis, DG products have become thethird most used feedstuff in United States livestock andpoultry diets, following maize and soybean meal. Thisincreased use occurred in conjunction with the rapidlyincreasing supply of DG produced by the dry-grind ethanolproduction industry. Record high feed grain and ingredientprices have caused livestock producers to adopt any and allopportunities to lower feed cost. As of early May 2011, theDDGS price was less than 80 percent of the market valueof maize grain. Relatively low price, coupled with greaternutrient concentration, provides a tremendous economicincentive for livestock and poultry producers to maximizedietary inclusion rates of DG. Based on diet cost economics,the questions United States livestock producers haveasked during the evolution of the ethanol industry and DGproduction have transitioned from “Can we use distillersco-products in animal feeds?” to “How much distillersco-products can we use?” to “Can we use even more coproductsthan that?”Marketing of co-productsOver the past ten years, the United States ethanol industryhas increased DG production from 2.7 million tonne in2000, to 32.5 million tonne in 2010. Beef, dairy, swineand poultry have been the primary consumers of theseco-products. Research is being conducted that is expandingthe use of DG co-products into small ruminant diets andaquaculture feeds, as well as for companion animal feedand human food products.The dissemination of knowledge about the use, valueand application of co-products is essential for creating newmarkets. The U.S. Grains Council has been in the forefrontof new market development for ethanol co-productsworldwide. Much of the information used to develop theinternational market for ethanol co-products has also beenused to develop the domestic market. The marketplacecontinues to value the many positive attributes of distillersco-products and is becoming more knowledgeable atmanaging the challenges that feeding some of co-productshave created for some animal species. DG marketers aredelivering better information about product characteristicsand nutrient profiles so that the end user can better evaluateand realize the value from these co-products.A number of approaches are used to market ethanolco-products. Many ethanol plants have on-site, staff merchandisersthat market their co-products to local livestock