Distillers Grain Set To Ride Ethanol Coattails

Demand for distill-ers 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 distillers 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 distillers 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 distillers grain last week in Iowa was $116.25 per ton, compared with $126.25 a year ago, USDA said.

Demand for distillers 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.

The slowest corn harvest in more than two decades has also reduced the amount of corn on the market and pushed prices on the Chicago Board of Trade toward the $4 level, or about $143 per ton.

Some hog producers have increased the amount of distillers 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.

Exports of distillers 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, fish meal, even bone meal,” Keefe said.

The top three importers so far this year, respectively, are Canada, Mexico and Turkey, USDA said.

“For most of the foreign markets, up until 2004 it was an unknown feed ingredient,” Keefe said.

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