February 12, 2020

 

Green Plains shifting business model to livestock feed

 

The company, one of the biggest producers of ethanol in the United States, plans to switch to producing animal feed to survive a price crash for the corn-based fuel, reported Reuters.

 

About US$400 million will be invested into the new project among its 13 plants spanning two to three years to produce a corn-based, high protein animal feed into Green Plain's new flagship product. Ethanol will become a low-margin by-product of the company.

 

This changes Green Plains business strategy of pumping out the fuel and putting the remnants for sale as low-quality feed for cattle and swine, known as distillers dried grains (DDGS).

 

There is demand for high-protein animal feed with a growing US cattle and swine industry. In addition, there's increased demand for meat in Asia, especially in China where the African swine fever outbreak has decimated domestic pork supplies.

 

Todd Becker, Green Plains chief executive said livestock feed will become the company's main commodity, revenue stream and profit stream, especially as the ethanol industry is underdisciplined and oversupplied.

 

The company reported a 19.7% revenue drop to US$1.701 billion last year, according to its annual report. This is the lowest revenue since 2010.

 

Green Plains will begin producing its new high-protein livestock feed from February 2020 at its Shenandoah, Iowa plant after an investment of US$35 million. The new feed is targeted towards aquaculture producers and contains 50% protein, more protein content than soymeal.

 

The US Grains Council said soymeal costs two times more than DDGs.

 

Novozymes A/S will partner with Green Plains to produce the high-protein feed through the use of microbial technologies and enzymes. Green Plains has announced an aquaculture feed joint venture with Optimal Fish Food.

 

In the future, the feed's protein content will be boosted to 60%.

 

-      Reuters