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Biofuel by-products to drop protein prices

Published on 1 January, 2007, Last updated at 00:01 GMT

By Lyndsey Smith
AG Canada

Ask anyone building an ethanol plant about what they're going to do with all the DDGS (dried distiller's grains with solubles), and they'll probably sing its praises as a great, inexpensive protein source for dairy cattle or feeders. Same goes for those planning biodiesel plants when asked about the meal by-product. But as American ethanol capacity ticks up to 10 billion gallons annually within the next 14 to 16 months, and as 2 big new ethanol plants start running in western Canada, the feed market is about to be inundated with cheap protein.

Bill Tierney is executive vice-president of research and marketing for John Stewart and Associates, based in Washington, D.C. Tierney estimates total DDGS produced in the U.S. could top 34 million short tons within 2 years, if all ethanol capacity is being used. Add in 42 million tons of soybean meal in the U.S. alone, and North America is headed for a protein glut.

Here in Canada, Husky Energy's new wheat-based ethanol plant at Lloydminster will produce 130 million liters of the fuel and 130,000 tonnes of wheat DDGS annually. Husky's plant in Minnedosa, Man., slated for late-2007 startup, will mirror that production. Vince Chin, general manager of supply and logistics for Husky Energy, says marketing the wheat DDGS is ongoing. "DDGS is sold in bulk and transportation could be costly. We'd like to keep markets local," he says. In Manitoba, those local markets could be hog barns, which have low tolerance for fusarium. That means any feed wheat used to make ethanol must have very low fusarium levels, which can be tough to achieve in Manitoba some years. For the Lloydminster plant, local feedlots and dairies will be the target markets.

"There's no doubt we'll be awash in cheap meal within the next few years," says Dave Hickling, vice-president of canola utilization for the Canola Council of Canada. He anticipates a significant increase in both canola and soy meal tonnage by 2008. "Our number one market for meal is the dairy market. After that market is met, we can go into hog and poultry rations, but here we need more energy in the meal to compete," Hickling explains. And unfortunately for canola meal, it competes directly with DDGS in the dairy market.

Dr. Jerry Shurson, professor of swine nutrition and management with the University of Minnesota, has evaluated the use of DDGS in rations for both ruminant and non-ruminant livestock. DDGS can fit in rations, but Shurson says the amount is limited. "In general, most DDGS will be used for dairy and beef. Inclusion rates for wet DDGS can be as high as 30% to 40% of dry-matter intake (DMI) for beef cattle and 20% DMI for dairy," he explains. Anything over 20% DMI in dairy without proper long fiber or forage for balance can make milk fat percentages fall, he notes.

Inclusion rates are even lower for pigs. "We might see 10% to 15% in grower and finisher rations, though the industry would like to include more. The limit is probably 20%," Shurson says. There is some concern over storage of fresh pork from pigs fed

high rates of DDGS. Some in the industry are concerned that the fat in pork becomes oily faster and may have a reduced shelf life. But Shurson says in a taste test, participants noted no taste difference in bacon from pigs with up to 30% DDGS in their diet.

While DDGS does provide a protein alternative, soybean meal remains the gold standard. It won't be completely replaced, even with cheap DDGS, Shurson says. But even if 75% of every livestock ration in the U.S. included the maximum recommended levels (20% for dairy, 40% for beef, 20% for hogs and 10% for poultry), the U.S. would only need about 27 million short tons of the stuff. And if projections are true, that is 10 million tons short of the forecast DDGS production in the U.S. by 2011.

This could take the bottom of the canola meal market too. For its part, the canola industry has been working to add energy, and thus value, to canola meal. It wants to breed varieties with higher energy and a better amino acid mix. It also wants to develop processing solutions and non-food or feed uses for the meal. "I wouldn't be surprised if new plants are designed with the intention of using the meal as an energy source," Hickling says. Tierney agrees. In the U.S., ethanol plants using coal or coal fines for heating could convert to DDGS. Loaded with phosphorus, DDGS could also be used for fertilizer.

Research projects are also testing a dry mill process for ethanol production that could change the composition of the DDGS to better suit different uses. At present, one of the major hurdles to using DDGS in a ration is that the feed value can be inconsistent between plants or even between millings.

As the glut of DDGS and meal comes on the market, livestock producers who can incorporate high percentages of DDGS or meal, to offset the increased cost of feed energy, will come out on top, Tierney concludes. "But we'll see significant variability between markets and very localized markets."

The question will be what to do with the excess. Prospects for exporting DDGS and meal dwindle as every other country producing biofuels plans to do the same thing. And as ethanol's insatiable demand pushes up the price of corn and thus other feed grains, will the livestock industry expand quickly enough to consume all the cheap protein?


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