Corn is a hot commodity. Livestock producers want it for feed. Export houses want it for overseas sales. Ethanol producers keep bidding up the price to feed their refineries. Consequently, the price is strong and has substantial demand-driven support. But take a look at the price of distillers’ dried grains (DDG), which is an ethanol co-product. You’ll see a corn-based product, going up in price also, but driven more by the growing supply than from demand. If you produce livestock, the price of DDG should be on your radar screen and let’s find out why…

Brian Roe’s December Livestock newsletter from Ohio State University compares the corn and DDG prices in the Eastern Cornbelt, where there are fewer ruminants, and more swine and poultry compared to the Western Cornbelt, where DDG is also piling up at ethanol plants.

Roe says the Sept 1 to Nov 30 span saw corn prices in Central IL rise 76%, while DDG prices rose only 38%. At Toledo corn climbed 67%, compared to Lawrenceburg, IN which recorded only a 9% increase in DDG prices. While the price of DDGS is friendlier than corn, the nutrient value of the product is quite comparable, says Roe, “Dried distiller’s grains have as much dry matter (about 89%) and energy (0.89 mcal/lb) as corn and soybean meal and have much more protein than corn alone (31% compared to 9%). The high protein of DDG means it can replace both corn and bean meal in many rations.”

But while nutritional values of corn and DDGS are equal, prices don’t necessarily move in lockstep with each other. “Analysis of the cost of Central IL DDG suggests that, from 1999 through 2006, the average price of DDG was $85 when south Central IL corn was at $2. In fact, over that time period, the average DDG price reported in Central IL was $85.10 while in Lawrenceburg, Indiana, it was $87.90. For every dime that corn increased, the price of DDG went up by $2.58 (per ton.)” But Roe says prices of corn and DDG have diverged during the past 5 weeks and he rhetorically asks if this is a temporary aberration, or a new standard? “It is a question that only time will fully answer.”

He says there are two schools of thought. One says that DDG prices will remain at lower levels until livestock producers realize what is happening and consumption catches up with the supply. The other school of thought is that ethanol plants are grinding out DDG more rapidly than the livestock industry can consume it, with the result that corn prices will remain high and DDG prices will remain low.

Regardless of the trend, Roe says livestock producers should be asking themselves if it makes sense to convert DDG into as much of their ration as they can. Roe calculated the price savings for Central IL livestock producers, based on inserting one ton of DDG, instead of 26.1 bushels of corn and 420 pounds of soybean meal. “Over the 1999-2006 timeframe examined, the average savings from such a substitution was $92.90 for each ton of DDG added to the feed ration. Furthermore, this has spiked during the past 2 months, rising to nearly $130 per ton.” In a related note, prices of gluten feeds or wet distillers’ grains have remained soft compared to corn, and livestock producers should evaluate it as well.

However, there are some caveats that Roe wants livestock producers to factor into their feed budgets.
1) Consult with a nutritionist to closely examine how much DDG to add to the ration.
2) Monitoring the quality of incoming feed (darker DDG can cause problems) and seeing how the animals are responding to the change in ration both in terms of palatability and performance.
3) There may be additional capital and labor expenses as these feeds may require new bins or modifications to existing facilities.
4) Ensure the new feedstuff is being stored properly and protected from the elements and moisture.
5) You’ll have to work out purchase and transportation logistics.
6) There may be changes in manure management that will have to be implemented to deal with its higher phosphorus content.

Summary:
DDG is plentiful, particularly around dry mill ethanol plants, and livestock producers should seriously consider incorporating it into their feed, particularly since DDG prices are not climbing as fast at corn prices. However, there are a handful of issues that will have to be addressed in utilizing DDG in a livestock ration. It remains to be seen if DDG prices will remain below corn values, or whether they will catch up, and what the long term trend will be.