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Corn+Soybean Digest

DDGS Market Surge

Pigs and chickens will soon see a new entrée on their fast-food menu called distillers' dried grain with solubles (DDGS).

Modern dry-mill ethanol plants in the Upper Midwest are creating a highly digestible feed in the form of DDGS. As a result, the market for DDGS — and the corn from which it's made — is expanding, especially as a swine and poultry feed.

“DDGS was once seen as a byproduct without much value,” says Bob Zelenka, executive director of the Midwest Shippers' Association. “Now the product tracks closely with soybean meal when you look at price.”

Why the change? Gerald Shurson, University of Minnesota swine nutrition and management specialist, says new ethanol plants in Minnesota, South Dakota and Iowa are using better drying and distilling technology.

These “new-generation” ethanol manufacturers produce a golden-colored DDGS co-product that has approximately the same energy value as corn when used in swine feeds.

“The golden distiller's grain is much more digestible than the DDGS produced in some older ethanol plants,” says Shurson. “The more digestible DDGS has good applications in swine and poultry feeds.”

The Midwest Shippers' Association is marketing this high-quality feed under the trademark NorGold. Shurson says the increased digestibility from the “new generation” DDGS helps to reduce the phosphorus content in swine and poultry manure and to improve gut health for animals.

Swine and poultry producers recognize the increased value and purchase more. “In 2001, 96% of all DDGS produced went into dairy and beef diets and only 4% went into poultry and swine diets,” says Shurson. “For 2002, as ethanol and DDGS production continued to increase, 20% went into commercial poultry and swine diets and 80% went to dairy and beef rations. That expanding market trend is continuing for 2003 and 2004.”

At 10-11% moisture, the new DDGS has a good shelf life and keeps well, even in tropical climates, says Shurson. That characteristic, along with recent high corn and soybean meal prices, is helping to attract more interest from export markets, he says.

“The industry is just now realizing that DDGS from this region makes a good feed for poultry and swine,” says Craig Damstrom, trade consultant for the Minnesota Department of Agriculture. “The advantage we have in the Upper Midwest is that our corn and ethanol co-products are generally free of mycotoxins.”

The Midwest Shipper's Association guarantees that NorGold's DDGS contains high levels of essential amino acids necessary for good swine and poultry production and minimal toxin levels.

“NorGold offers additional guarantees that the rest of the industry doesn't,” says Zelenka. “While the rest of the industry guarantees only protein, fat, fiber and ash content, we've taken it a step further to offer higher-value nutrition and safety.”

Zelenka adds that this high-value guarantee has sparked interest in DDGS, both domestically and in Mexico, Costa Rica, Cuba, Taiwan and other countries, and not just for swine and poultry. “Dairy feeding trials with NorGold in Cuba found a substantial increase in milk production,” he says. “Fidel Castro was so impressed that he now refers to all DDGS as NorGold.”

The extra export interest is essential to corn and ethanol profits. In 2000, the U.S. produced 3.5 million metric tons (mmt) of DDGS as an ethanol co-product, says Shurson. By 2005, that amount will likely double to 7.0 mmt.

“To use all the DDGS that's coming onto the market, we need to find 750,000 metric tons for export, basically doubling current levels,” says Damstrom. “However, you can only get a good price if you have a consistent-quality product, and that's what we're trying to provide our potential buyers.”

In addition to successful feeding trials in Cuba for dairy, NorGold feeding trials have also shown success in Costa Rica for poultry and in Mexico for swine, notes Damstrom. As international markets for DDGS expand, he says, “we're indirectly finding more markets for corn, and we're increasing the value of farmer-owned ethanol plants in the region.”

Since one out of 10 rows of U.S. corn ends up in an ethanol plant, the importance for developing profitable markets for ethanol co-products is increasing, adds Damstrom.

“Until recently, the increased value of Midwestern DDGS hasn't been recognized or utilized,” he says. “Now we're able to reward those ethanol plants that can offer a consistent, high-value product, with a higher price, which ultimately helps the farmer.”

DGS Statistics

The Iowa Corn Promotion Board and the Iowa Corn Growers Association have compiled the following statistics on dried distillers grains with solubles (DDGS), which illustrates the market surge for the product:

  • Current U.S. DDGS production is approaching 4 million tons.

  • Anticipated U.S. DDGS production in 3-5 years is 8 million tons.

  • When fermented, a 56-lb. bushel of corn creates 17 lbs. of DDGS.

  • DDGS represents 16-21% of an ethanol plant's revenue stream.

  • “New generation” ethanol plants create DDGS with 27% protein, 10% fat and 15% fiber.

  • A 30-million gallon ethanol plant will produce approximately 92,000 tons of DDGS, enough to feed 168,000 cattle 3 lbs./day.

Northern Soy Gets A Bad Rap?

Soybeans grown in the northern U.S. have long been discounted for having lower protein levels than soybeans grown in warmer climates.

However, preliminary findings from Iowa State University and the University of Minnesota show that northern-grown soybeans may be as good or better than southern-grown soybeans as a meal for animal feed.

“As protein content from soybeans in northern states falls off, some essential amino acid levels stay the same or increase,” says Charles Hurburgh, ag engineer at Iowa State University. “Since amino acid content doesn't go down for certain uses, price shouldn't go down either. In essence, the industry is building in a blanket discount that doesn't hold for everyone.”

The lower price for soybeans from northern states typically runs between 10 and 15¢/bu., due to protein levels that average about 1% lower than soybeans from southern states, says Bob Zelenka, executive director, Midwest Shippers' Association. To stop the automatic discount, “the industry needs to make a real change in its buying habits,” he says, “and animal nutritionists need to become more involved.”

Gerald Shurson, University of Minnesota swine nutrition and management specialist, agrees. “There is a fairly drastic price penalty for a small difference in protein content,” says Shurson. “High amino acid levels, particularly lysine, are more important when formulating good swine diets than protein content.”

Hurburgh points out that “lower-protein soybeans may produce meal that is higher in value for certain uses, even though the meal may have lower total protein content than meal from high-protein soybeans.” For example, he cites evidence of the higher content of key amino acids necessary for both the swine and poultry industry in northern-grown soybeans.

Craig Damstrom, trade consultant for the Minnesota Department of Agriculture, says he has potential clients outside the U.S. who are interested in buying northern-grown soybeans at a premium to obtain higher levels of amino acids for feed.

However, he's still analyzing data from multiple crop years to be able to use near-infrared technology for rapid testing at local elevators.

“I'm planning to start a demonstration trial on about 100,000 acres,” says Damstrom. “The key is to build in a premium price that is attractive enough to get farmers to participate and to use reliable testing equipment that can rapidly measure essential amino acid content prior to harvest. Once we do that, then we can do some match-making with farmers to promote this product to the end customer.”

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