Ethanol plant closures cause DDGS supply issues

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The 2012 drought is not only taking its toll on U.S. Midwest crop and livestock producers. Ethanol plants also are succumbing as high corn prices dry up their operating margins. Suspension of operations, along with reduced production at many plants, has reduced the supply of distillers’ dried grains with solubles (DDGS), a co-product of ethanol production widely-used in swine diets.

“High corn prices are not only affecting pork producers, but they are also causing ethanol plants to shut down or reduce ethanol and DDGS production due to negative profit margins,” says Dr. Jerry Shurson, professor of swine nutrition and management, University of Minnesota.  “DDGS has typically been priced at 75 to 85 percent of the value of corn, making it a good alternative ingredient to reduce feed costs.  Now it is being priced around 100 percent of the value of corn, making it less attractive.”

A report received by Pork Network indicates that some Iowa pork producers have to travel an extra one hundred miles to source DDGS after their normal supplier shut down.

East Kansas Agri-Energy, LLC in Garnett, Kan., is the latest ethanol plant planning to quit production. The firm announced Friday plans to temporarily suspend ethanol production operations beginning Oct. 1.

The company was formed in 2001 to construct and operate an ethanol plant and began producing ethanol in 2005 producing 42 million gallons per year annually.

The company cites the prolonged drought reducing the availability of corn and the resulting increase in prices as the main reason for the production halt. These challenges forced the company to reduce plant production capacity by 20 percent last April.

“We have studied the situation extensively and with the challenging economic conditions the Board of Directors has determined that it is in the best interest of the company and its shareholders to halt production at this time,” said Bill Pracht, board chairman. “We will monitor the situation with the hope to resume production of the facility as soon as market conditions allow.”

According to the Renewable Fuels Association (RFA), as of Jan. 1, 2012, 211 ethanol plants in 29 states were producing an estimated 13.9 billion gallons of ethanol and 39 million metric tons of livestock feed including DDGS and corn gluten meal. Each bushel of corn yields 2.8 gallons of ethanol and 17.5 pounds of livestock feed, according to RFA.



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anonymous    
August, 14, 2012 at 08:49 AM

hard to believe pork producers are feeding much DDG... if your in the livestock feeding business closing some Ethanol plants is good... if they didnt have all the crooks from Washington in there pockets feed wouldnt be so high

BobW    
Sacramento, CA  |  August, 14, 2012 at 09:47 AM

Hard to believe an anonymous person would post an ill-informed comment.

Greg Krissek    
Wichita, KS  |  August, 14, 2012 at 10:36 AM

Yes, truly ironic statement up above and maybe as ethanol plants slow down livestock producers will recognize even more all the benefits and value created when processing grain into ethanol. The protein value of distillers grains is well above 100% the corn value - and should be valued accordingly.

Ed    
NE  |  August, 14, 2012 at 10:59 AM

A bushel of corn produces 17.5 lbs of feed. Well Greg that is quite a loss of dry matter. It didnt make any more feed by turning it into a poor quality fuel. Yes the DDG protein is almost 3 times the protein of corn on a dry basis but the energy lb for lb is about equal. So there is a loss of feed by turning food into fuel. It is not all recoverable.

anonymous    
August, 14, 2012 at 11:32 AM

im not ill informed im in the pork and cattle marketing business for 35 years.... no doubt bob and gregg arent ...well see how manyplants stay operating with 8.50 corn...maybe the goverment will bail them out.. start feeding cattle and hogs ..then well see what you think of ethanol

Charlie Peters    
Hayward CA  |  August, 14, 2012 at 12:09 PM

CharliePeters writes: Lots of corn along 5 south of Sacramento that is reported to use 2000 gal of water to grow corn for 1 gal of ethanol for my gas tank. Should Governor Brown consider a waiver supported by the UN? Is fed EPA confused when a Lodi bread baker is taken to fed court to collect $625,000.00 fine for generating ozone from the ethanol made by baking bread while mandating millions of tons in our gas that may be a bigger deal than MTBE to our ground water supply? Do water folks check for ethanol in our drinking water? Drinking ethanol maybe rated as causing cancer but MTBE never has. Does ATF audit for the payment of $17 tax of moonshine from the GMO corn fuel ethanol? Let's see, a 10,000 gal tanker truck can move around a $170,000.00 tax and a reported $0.50 cent process can move fuel grade to food grade.

Pyotr Petrovich    
Ames, Iowa  |  August, 14, 2012 at 02:46 PM

The RFS2 program uses RINs to reduce actual corn consumption under circumstances like today's drought. Such situations were actually contemplated when the legislation was drawn up. You can't have it both ways, cheap DDGS and no ethanol. Those who feed DDGS have realized the advantage of sending some corn to ethanol. Farmers tend to produce what the market will buy. If there had been no ethanol demand for corn, then our farmers would have reduced the output to what animal feeders and the tiny amount the food industry directly consumes. Therefore, with or without ethanol, today's drought would have resulted in high prices. Discontinuing ethanol will (1) increase gas prices significantly over the short and long term, (2) create significant further unemployment, (3) discourage emerging fuel alternative technologies, (4) bankrupt 200 ethanol factories representing the loss of $40 billion, and (5) increase pollution and greenhouse gasses. If you kill the ethanol industry to slightly offset today’s drought driven high prices, you will not get the ethanol industry to ever return even when future high corn yields are back with low corn prices, even with sky high gas prices, even with higher greenhouse gas emissions, and even with government mandates. Be careful what you wish for

concerned    
kentucky  |  August, 14, 2012 at 11:12 PM

If you really believe in the free market, and advocate for the free market to allocate resources, you cannot also advocate for a regulatory system that gives one consumer an unfair advantage over all others. The ethanol industry enjoys a guaranteed demand for its product. If ethanol is such hot stuff as animal feed, how did we get along without it for years? I don't oppose the production of ethanol, just the mandate of its blending into gasoline. Why should the oil companies be required to market ethanol? The government has not mandated Ford to sell 1 Chevy for every 9 Fords it sells. We would all think it ludicrous for the government to so mandate. If ethanol from corn is such a wonderful thing, the companies that make it should have no trouble selling it without the production guarantee. Just think, it could do its own thing - manufacture, sell and distribute ethanol without having it mixed with gasoline for use in specially designed engines which can run more efficiently that gasoline burners, in places where emissions reductions are of the greatest need.

James Benson    
Hurley SD  |  August, 15, 2012 at 07:11 AM

We have needed more production since 2008 when the markets told us what the possibilities were with record prices open CRP planting 20 million more acres of coarse grains growing our economy instead shrinking the economy. GW should have opened up the acres maybe Obama could be leader and open these acres to feed the world.

Joanne Ivancic    
Frederick, MD  |  August, 15, 2012 at 01:41 PM

MTBE is the carcinogenic banned substance, not ethanol. As noted, millions of people drink ethanol regularly. And, yes, ATF inspects ethanol plants of all types regularly. Even without RFS, gasoline will have ethanol as a cost-effective additive for the octane it brings. Petroleum- based octane is more expensive to produce. Eventually, we'll have ethanol from feedstock other than corn. But less likely without RFS which encourages development of those technologies and investment into production. Charlie, I'd like to know how you make ethanol when baking bread. I've never heard of such a thing and I've made quite a few gallons of home-made wine--never connected that to baking bread. For more on the importance of ethanol to performance of engines, see: http://advancedbiofuelsusa.info/advanced-biofuels-usa-updates-next-generation-engines-white-paper


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