Ethanol?s Impact on Animal Feed

April 26, 2006 — 

According to a February 27th article by Chris Hurt published in the University of Illinois' Weekly Outlook, the expansion of ethanol production will likely have an adverse effect on the price of animal feed domestically and internationally.

Ethanol plants currently under construction are estimated to produce 500 million gallons of ethanol per year, requiring 175 million bushels of corn. It is obvious that ethanol production will compete with current uses for corn, a fact that worries animal producers particularly in the eastern and southeastern U.S.

Distillers dried grains (DDG), a by-product of ethanol production, can be used in animal rations. It's most common use is as a substitute for soybeans in cattle and dairy rations and as a substitute for corn in hog and poultry diets. As an example with current corn and soybean meal prices, DDG's are worth about $170 per short ton in beef and dairy rations but only $84 per short ton in poultry and hog rations according to Hurt.

Concerns about the use of DDG's in livestock feeds include high phosphorous levels, the impact on fat deposition and mycotoxin concentrations. The production of DDG's will be so large that supplies will most likely force DDG prices down to their lowest value which means they will be similar to, or just above, the value of corn. Ethanol plants in the East may find it difficult to dispose of the DDG's locally, resulting in increased freight costs and exports.

One of the questions as yet unanswered in the hog and poultry industries in the East and Southeast is will there be enough added value derived from the use of DDG's in animal feeds to offset higher corn prices? If not, Hurt suggests it could result in some restructuring of the animal industries.

Source:
farmdoc, University of Illinois Extension