Friday, May 07, 2010
Can Feeding DDGS Maximize Livestock Profitability?
Pork producers and cattle feeders are making their first profits in many years, thanks to lower numbers of livestock and a growing domestic and export demand for US beef and pork products. Both hogs and cattle are expected to be in the black for the balance of the year, but economists are warning producers not to expand in an effort to take advantage of the profitability. As an alternative to expansion, some producers may want to increase their profits with operational changes, and here is an idea that may work for some.Feed cost can be the killer in livestock production, and when corn and soybean prices climbed in 2007 and 2008, many livestock producers were forced out of business because they had been operating for many quarters in the red. With meat prices higher and corn and soybean prices more stable, some livestock feeders may be able to increase their profitability by replacing corn and soybean meal with distillers’ grains. That is the premise of Kansas State University economist Dan O’Brien. His research indicates the expansion of the biofuels industry has provided an increasing amount of DDGS over time. The annual production of DDGS has increased more than tenfold in the period from 2002 to 2009, and surpassed 58 billion pounds last year.
O’Brien says animal scientists have demonstrated the effective use of DDGS in livestock rations, as well as the limitations which vary from one specie to another. Those limits are estimated at 20% for dry DDGS for cattle, 10-15% for dairy cattle, and 10% for hogs and poultry. In the past year, 39% of the domestically used DDGS were used for dairy, 38% for beef cattle, 15% in swine rations and 7% in poultry rations.
O’Brien quotes a study by Argonne National Laboratory that 1 pound of DDGS can displace 1.25 pounds of corn for beef cattle; 1 pound of DDGS can displace 0.51 pounds of corn and 0.58 pounds of soybean meal in dairy cattle; and 1 pound of DDGS can displace 0.95 pounds of corn and 0.095 pounds of soybean meal in swine. While the nutrition may be balanced and the limits may not be exceeded, what about the cost?
Since livestock feeders will develop rations to create the most revenue over feed costs, most will try to maximize output of livestock products at an economical cost, and will continually try to balance the cost of a variety of feedstuffs. The Kansas State economist, looking at the changing price relationships over time, says the more likely that more of a feed product would be feed compared to its lesser cost. He says since January 2007, the per pound cost of corn and DDGS have been nearly equal, but DDGS has been priced less since July 2009. Soybean meal prices per pound have been higher than corn or DDGS from early 2007 into early 2010.
Specifically, Iowa DDGS prices have been trending lower relative to both corn and bean meal for the past three years. In early 2007, DDGS were 50-60% of corn prices, and then they dropped to 17-18% in September 2009, and have risen to 31-36%. Relative to soybean meal prices, DDGS has been 67% of meal prices since September 2009 and currently are at 38%. In Nebraska, wet distiller’s grains were compared to corn and soybean meal prices, and were much lower in price than the DDGS.
O’Brien concludes that DDGS prices in both Iowa and Kansas are less than corn or soybean meal and have been since 2007, and are near the low in relationship to soybean meal prices. He says that is providing an incentive to livestock producers in an effort to maximize profits.
Summary:
Distiller’s grains, not only dry, but moderately moist, and wet, can all be used as replacements for corn and soybean meal in rations for beef and dairy cattle, swine and poultry. While there are limits for inclusion of DDGS in the rations, the price relationship between DDGS and corn and soybean meal gives an advantage to DDGS. In fact, the price relationship between DDGS and corn and between DDGS and soybean meal is at some of the lowest levels in the past 3 years, which provides an opportunity for livestock producers to maximize profits.
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Posted by Stu Ellis on 05/07 at 04:41 AM | Permalink