What is that odd looking stuff in your feed bunk? Your livestock seem to be eating it, and your lender likes it, also, you say? They do have strange preferences from time to time. You say the stuff is DGS? Don’t you mean DDGS? Oh, it’s something different! That’s why your lender likes it. There he is, down there on the end!

With apologies to all of the good lender folks around the Cornbelt, DGS seems to have captured a major market among livestock feeds. Compared to DDGS, DGS has more moisture in it and is considered distillers grains and solubles. DDGS is distillers DRIED grains with solubles says Iowa State University ag economist Bob Wisner, who reports DGS use has expanded very rapidly in the past couple years. Since the transportation and storage system figured out the bottlenecks, that has allowed more moisture in the product, and the higher moisture product has even made its way to foreign ports. Wisner says, “Further growth is expected in the next few years and continued growth in the markets for DGS will be important for profitable ethanol production. Early projections show a 3 to 4 percent increase for 2010-11.”

Distiller’s grain production was non-existent in 1980, but 30 years later the industry will produce about 36 million metric tons; and 92% of the annual volume has come since 2001. That rapid rise has been accompanied by tighter corn supplies with increasingly volatile prices for corn and soybean meal. As a result livestock producers have looked for alternative feeds and DGS has become popular. Wisner says its expansion will have to occur for profitable ethanol production and that is important to farmers who are producing corn for the ethanol refinery. In addition to US demand for DGS, China has also become a significant market in the past 15 months to feed its growing livestock production.

The key to DGS acceptance will be pricing says Wisner, and that will depend on prices for DDGS, corn, and soybean meal. In the past 20 years, the price of DDGS has climbed from 60% of the price of corn to 100% of the corn price, and was 110% of that price last year at Indiana refineries. In western Iowa, the price of DDGS usually follows that of corn, but not exactly. Since one pound of DGS will nutritionally replace more than one pound of corn, it has become an important cost savings for a livestock feeder. Time of year will also make a difference in the value of DGS, since it can be stored longer in colder months, and will have a higher value at that time of year.

When compared to soybean meal, the price of DDGS has trended down for the past 20 years. In 1990, it began at 75% of the value of soybean meal, but in the past year the comparative value had declined to less than 40% of the value of bean meal. Wisner says, “Its actual value in livestock and poultry feeding depends on the species being fed to as well as the cost of synthetic amino acids and other factors that can vary over time.”
Currently, 75% of the DGS is used domestically, but 25% is exported, and a quarter of the exported volume goes to China, with Canada and Mexico sharing about one-third of the exported volume. Wisner says, “China’s consumer demand for more animal, poultry and aquaculture products is growing rapidly. It is generally expected that the Chinese market will increase further in the years ahead, thus becoming a potential influence on DDGS prices and availability for other users.”

Summary:

Distiller’s grains have shown an increasingly important role in livestock feeding, both for dried distillers grains and distillers grains which hold some degree of moisture. Values have increased to an equivalency of corn, and flexibility of use has enhanced their value. While a significant use of the various products will be important to the profitability of the ethanol industry, help is also coming from abroad, where international markets are consuming one quarter of US production.

Source: Farmgate, http://www.farmgate.illinois.edu/