Not All DDGS Are Created Equal

As the US uses more and more corn for the production of ethanol, the supply of feed grains is becoming tighter, writes senior editor, Chris Harris, for ThePigSite.
calendar icon 5 February 2009
clock icon 6 minute read

Over the last year feed use for corn, which used to be 58 per cent, fell by 11 per cent last year.

However as the use of corn for feed diminished, so the by-product of ethanol production - distillers grains - have started to become more and more dominant in animal feed use.

According to a report by Dr Jacinto F. Fabiosa, the co-director of the Food and Agricultural Policy Research Institute at the Centre for Agricultural and Rural Development at Iowa State University, each bushel of corn feedstock for ethanol produces 17 lbs of distillers grains.

Dr Jacinto F. Fabiosa

In 2007, this represented 17 per cent of the total weight of feed used in the US.

However, Dr Fabiosa shows that using Distillers Dried Grains with Solubles (DDGS) presents its own challenges as the nutritional quality of the DDGS and the costs vary according to which ethanol plants are producing the product, the method of production and how they are mixed by the feed compounder.

"Using distillers dried grains with solubles in animal feed rations presents its own challenges. One problem often raised by feed compounders is the lack of consistency in the nutritional composition of DDGS," Dr Fabiosa says in the report, Not All DDGS Are Created Equal: Nutrient-Profile-Based Pricing to Incentivize Quality.

He says that although corn and soymeal used for feed are variable in their nutritional content, they are more consistent than DDGS, which is subject to a biological process by batch, which introduces more sources of variability. The variability can be multiplied by three when the corn reaches the stage of being DDGS and the further drying process increases the reactions that can affect the digestibility of the amino acids and the energy.

Variation of Composition

The report shows that he found variation of composition of DDGS within the same production facilities.

Dr Fabiosa also found that the DDGS not only varied in nutritional quality, but also in cost.

"It is very important that feed compounders properly account for this variability of the nutrient composition of DDGS in their feed formulation," he says.

"If they are too conservative and oversupply the nutrients then they are paying unnecessarily for redundant nutrients and may even compromise the growth performance of animals by expending energy to excrete surplus nutrients. On the other hand, if the nutrients are inadequate to the requirements of the animal then the growth performance of the animal is equally compromised.

"The ideal situation is for feed compounders to secure their supply of DDGS from a single source with dependable DDGS products to eliminate inter-plant sources of variability. But even with this strategy, feed compounders still face intra-plant variability, which can be substantial."

In his study, Dr Fabiosa examined the production of DDGS from 40 different ethanol plants.

The aim was to examine the impact of nutritional composition quality and variability in the use of DDGS in a finishing pig feed ration.

It looked at whether the DDGS nutrient content variability reduced the optimal inclusion rate below the maximum allowable 20 per cent and by how much the variability of the nutrient composition compromises feed costs savings of the compounder.

It also examined whether the compounder could increase the feed value by minimising variability, whether there should be discounted prices for more variable nutrient content and whether there should be a premium or price structure according to the nutrient content.

The 40 plants examined came from 11 states and the prices of corn, soy meal and DDGS were taken from the USDA figures.

The findings show a considerable variability in nutritional values and also costs.

Variability Affects Costs

The report says: "These results strongly suggest that not all DDGS are created equal. Their nutrient profiles are very different and can have substantial feed cost savings implications.

"Since DDGS product quality is very important, a pricing discount mechanism is needed to reflect the value of quality and incentivize the production of quality DDGS products in the market. Without a pricing mechanism that can reflect product quality differentials, above-average (in terms of nutrient profile quality) DDGS products will not gain any premium, and below-average DDGS products will not be discounted, so there is no incentive to improve quality.

"However, if this price signal can be communicated to individual ethanol plants, then they can assess their respective DDGS quality control production process and calculate how much it would cost to improve the quality of their DDGS products and implement changes when benefits exceed costs. The benefit in this case is the removal of any quality-related price discount."

The study found in examining 1,000 cases that in only two cases should DDGS be fed under the 20 per cent ratio - in proportions of 12.45 per cent and 13.78 per cent.

"Our analysis shows that DDGS is a dominant feed ingredient making it a good candidate to enter into the optimal ration solution," the report concludes.

It calls for a pricing policy based on the nutrient content of the DDGS and it recommends that the DDGS should be drawn from one supplier to get the least variability of nutritional content and pricing - even though there is a possibility for variation within a single supplier.

By limiting the source to the single supplier and limiting the variability, Dr Fabiosa says that savings of $751 per tonne can be made compared to those taking supplies from different suppliers with a high variability of nutritional content.

"This number can also be interpreted as the rate of discount on the price of DDGS (4.52 per cent) that can be imposed on DDGS suppliers with the full variance by feed compounders whose DDGS inputs have only intra-plant variability.

"For an ethanol plant with a 50-million gallon capacity, this price discount can amount to a loss of $1.11 million," Dr Fabiosa says.

He says that this information can be useful to the ethanol plant in assessing the potential for improving their quality control measures.

Further Reading

- You can view the full report by clicking here.

January 2009
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