What is that odd looking stuff in your feed bunk? Your livestock seem to be eating it, and your lender likes it, too, 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.

With apologies to all of the good lender folks around the Cornbelt, distillers’ dried grains seem to have captured a major market among livestock feeds. Compared to distillers’ dried grains with solubles (DDGS), DGS has more moisture in it and is considered distillers’ grains and solubles. Conversely,   DDGS is distillers’ dried   grains with solubles, says Bob Wisner, Iowa State University ag economist. He reports DGS use has expanded 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.   “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 percet to 4 percent increase for 2010-2011,” Wisner says.

Distiller’s grain production was non-existent in 1980, but 30 years later the industry will produce about 36 million metric tons; and 92 percent 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 U.S. demand for DGS, China has also become a significant market in the past 15 months, as it attempts 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, DDGS price has climbed from 60 percent of the price of corn to 100 percent. It was even 110 percent of that price last year at Indiana refineries. In western Iowa, the price of DDGS usually follows that of corn, but not exactly. Since 1 pound of DGS will nutritionally replace more than 1 pound of corn, it has become an important cost savings for livestock producers. 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 percent of the value of soybean meal, but in the past year the comparative value had declined to less than 40 percent of the value of bean meal.   “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,” Wisner says.

Currently, 75 percent of the DGS is used domestically, but 25 percent is exported, and a quarter of the exported volume goes to China, with Canada and Mexico sharing about one-third of the exported volume. “China’s consumer demand for more animal, poultry and aquaculture products is growing rapidly,” Wisner says. “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.”

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