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by Stu Ellis, FarmGate blog

The growing production of ethanol has resulted in more distillers' dried grains being produced, and depending on their relative value to corn and soybean meal, DDGS are being fed in increasing volume. In the past year, the market share of DDGS has overtaken that of soybean meal for the number two feed for the livestock industry.

Nearly 30 years ago a young farm broadcaster was trying to figure why the soybean industry did not warmly accept "gasohol" as the new golden boy of Cornbelt agriculture.

After all soybeans were oil and protein, and did not compete with a motor fuel. During a broadcast interview an association economist danced around the sensitivity of the issue, but when the recorder was off admitted that soybean meal would be displaced by "by-products" from the alcohol refining process and the value of soybeans would decline.

Let's fast forward three decades.

At the time of the interview, ethanol was primarily coming from wet corn milling plants and the "by-products" which have since become co-products were wet corn gluten and corn gluten meal, and their value was reduced the farther they had to be transported because of the high water content and quick rate of spoilage.

With the bulk of ethanol now being produced a dry milling plant, distillers' dried grains (with solubles) or DDGS are one of the driving forces in the livestock feeding industry. Have they replaced soybean meal? To a great extent, USDA economists say DDGS has allowed livestock feeders to substitute them for varying amounts of corn and soybean meal, depending on the animal species and maturity of the animal.

USDA economists Linwood Hoffman and Allen Baker have taken a thorough look at the impact of DDGS on corn and soybean meal in the feed industry. Among the variables they have to evaluate is the presence of toxins carried from the corn into a concentrated state in the DDGS, the varying quality of the DDGS from one refiner to the next, and the varying prices of corn, DDGS, and soybean meal, vis--vis the rate at which DDGS can be included in the ration of the livestock being fed. Included also are variable moisture content, product availability, and nutrient excesses or deficiencies, which affect how they must be handled and stored, impacting costs to feed buyers. In rough terms, inclusion of DDGS can be in the range of:

1) Up to 40% for finishing cattle
2) Up to 20% for dairy cattle
3) Up to 30% for grow-finish hogs
4) Up to 15% for laying hens, broilers, and turkeys

Across all of the species of livestock, the potential consumption of DDGS for the past five years has generally been 60 to 63 million metric tons, based on total head being fed the maximum amount for a healthy ration. However the amount actually fed ranged from 12 million metric tons in 2006/07 to 29 million metric tons in 2010/11. Based on the market share of livestock consuming DDGS, the amount that if fed per year will vary, say the economists. Substitution rate began in 2006 with 1 mmt of DDGS substituting for 1.03 mmt of corn and 0.19 mmt of soybean meal. And in the past year, the rate changed to 1 mmt of DDGS substituting for 0.98 mmt of corn and 0.23 mmt of soybean meal.

The economists say DDGS has achieved a 17.5% share of the feedstuffs market in the US. And they add, "Most of this increased market share can be attributed to the significant increase in domestic feed consumption of DDGS in recent years. As of 2010/11, DDGS replaced soybean meal as the number two feedstuff fed, and is second only to corn."

The soybean industry economist was clairvoyant, at least in knowing ethanol co-products would capture market share. Whether that has devalued soybeans remains for another study to determine.

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