April 26, 2004

 

 

US Cattle Farmers Turn To Ethanol Byproduct As Cheaper Animal Feed Alternative
 

Many U.S. beef and dairy producers struggling with this year's soaring costs for traditional animal feeds have turned to distiller's dried grain (DDG) as a cheaper feed alternative, industry sources said on Friday.

 

As the ethanol market exploded in response to demand for cleaner-burning fuel additives, DDG, a byproduct of corn-based ethanol production, has grown in recent years

 

U.S. ethanol production is expected to rise to 3.3 billion gallons in 2004, up from 2.13 billion in 2002. DDG has grown in lock-step, with production expected to rise to 6.2 million tonnes in 2004 from 4.5 million two years ago.

 

The boost in production has pressured DDG prices this year, at a time when costs for more traditional protein feed supplements like soymeal have surged to multi-year highs.

 

Cash soymeal prices climbed above $320 per ton earlier this year. That is more than double year-ago levels, as a U.S. soybean shortage after last year's drought set futures soaring.

 

Cash 48 percent protein soymeal in central Illinois was being offered at $300 to $306 per ton on Friday.

 

In contrast, DDG was selling at around $112 per ton in central Illinois on Friday. The wide spread has led many livestock producers -- both at home and overseas -- to turn to DDG for their feed needs.

 

"The high price for all the commodities around the world as well as the world demand are driving the additional use of DDG," said Gary McKinney of the U.S. Grains Council. "DDG is relatively cheap because of the availability. And you also have a situation where you don't have to move it as far."

 

The bulk of U.S. ethanol production is scattered through the U.S. Corn Belt, making it simple and cheap to deliver to dairy, beef and swine producers in Midwestern states.

 

"It has been discovered to be a good viable feed substitute," said Tracy Snider, spokeswoman for the National Corn Growers Association. "Part of it is due to the ethanol industry's commitment to not just produce ethanol, but also producing animal feed. They're really seeing it as a co-product."

 

DDG's protein content is similar to that of soymeal, Snider said, with DDG's absence of lysine being the only big difference.

 

Dairy and beef producers use about 80 percent of DDG, while 15 percent is used for swine feed and the rest going to poultry, according to the NCGA.

 

About 22 to 25 percent of DDG is sold into export markets, with Southeast Asia and South America the prime destinations.

 

"The European export market has not grown. The export material going to central and South America, the Caribbean, and Southeast Asia has grown a lot," said Sean Broderick, a grain merchant at Commodity Specialists in Minneapolis, Minnesota.

 

Traders said this week that Vietnam, Malaysia and Indonesia purchased DDG from the United States for the first time this year. But domestic sources said the continued strong domestic demand would prevent foreign markets from draining U.S. stocks.

 

"I don't know that a larger percentage is going toward exports because domestic consumption has been so strong," said McKinney of the U.S. Grains Council, which promotes exports.