January 4, 2012

US DDGS exceeds supply growth

The rapid growth of US ethanol production is matched by the production of distillers' grains (DDGS), including a range of animal feed co-products derived from corn-based dry-mill ethanol production, which has quadrupled since 2004/05.

Despite initial concerns about the capacity of domestic or foreign livestock feeders to utilise DDGS, they are now the second largest category of processed feed used in the US, amounting to an estimated 29.1 million tonnes in 2010/11. ERS projections point to further growth in DDGS production. For the foreseeable future, however, potential feed use of DDGS in the US exceeds projected supply.

Initially, observers questioned the industry's ability to process and market a high-quality, storable, DDGS product and the degree to which the nutritional characteristics were suited to certain types of livestock/poultry. Nevertheless, both domestic and international feeders rapidly adopted DDGS, which possess at least the same energy as corn and protein content between that of corn and soy meal. All livestock and poultry can use the nutrients from DDGS, but beef and dairy cattle (ruminants) can use them more readily than hogs and poultry (monogastrics). Furthermore, technological advances are making it possible to change the composition of DDGS and tailor them to the nutrient needs of each type of animal.

As much as one-quarter of US DDGS supply has been exported, which will support continued growth in DDGS use. Main markets include China, Mexico, and Canada. Exports have benefited from technical assistance from US trade groups.

ERS researchers developed a methodology to compute the US supply, as well as actual and potential feed use of DDGS. Based on midrange diet inclusion rates suggested by animal nutritionists for different types of livestock and poultry, the analysis shows that potential feed use of DDGS could have averaged 62 tonnes during the past 5 years, far above estimated actual domestic DDGS feed consumption of 29.1 tonnes and supply of 37.4 tonnes for 2010/11. With production growth of corn-based ethanol and corresponding DDGS expected to slow in the next 10 years and with exports of DDGS expected to grow, actual domestic feed use of DDGS projected for 2020/21 is only about half the projected potential feed use demand of 64 tonnes.