Livestock producers had better get ready to kiss goodbye something they could always count on in the past.
“In North America, we’ve always had cheap energy in the diet and more expensive protein. Now it’s switching the other way,” University of Minnesota economist Douglas Tiffany said in an interview during the recent Western Nutrition Conference in Winnipeg.
“Energy is becoming more dear.”
The reason for the big shift is the advent of a major North American ethanol industry, which in the Midwest United States is beginning to chew through large amounts of corn.
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Corn is the mainstay of the U.S. livestock feeding system, which is used mainly for its high energy content. American livestock feeders have always been able to rely upon relatively cheap corn to feed energy to their animals and have used feed such as soybean meal as premium-priced supplements to boost the protein content of the feed ration.
But ethanol production consumes most of the energy content of the corn that the Midwest industry relies upon, leaving distillers dried grain that is energy poor but protein rich.
Tiffany said livestock producers may soon find they can easily find cheap sources of protein but will have to fight to get corn.
One impact will be a general increase in corn prices in the long term by about eight percent, he said. That would be about 30 cents US per bushel.
It will also encourage farmers to find ways to squeeze energy from protein in distillers dried grain and other high protein feeds.
Tiffany estimated that broiler chicken and turkey production will increase because of an anticipated surge in soybean meal production by the biodiesel industry, but all other livestock production, which relies much more on corn, will decline.
Livestock producers will have to develop more expertise in formulating feed rations to remain profitable.
“It’s a challenge and an opportunity to use that material in the feed ration,” Tiffany said.
“It’s OK in a lot of rations, but they’re going to have to be more careful with it. It may have somewhat different performance in their animals.”
Tiffany said farmers may have to accept a slowing of average daily gain in exchange for cheap distillers dried grain.
He said ethanol producers think of distillers dried grain as waste and not a profit centre. That has to change.
“The companies that are producing it aren’t ready to get the most out of it,” he said. “Their attitude is, ‘this is a byproduct. Let’s get rid of it. We’re making money on ethanol.’ “
That attitude will probably change when ethanol profits become cramped or turn into losses. Then the distillers dried grain will become a vital part of a plant’s viability.
“It’s money slipping through their fingers if they don’t utilize it well.”
The economic reality of distillers dried grain will inevitably drag cattle feeding back to places like Iowa because it will become more expensive to ship Midwest U.S. feed out of the region once it has gone through the ethanol production process.
“They’ll try to feed it out wet,” he said. “It’s cheaper and easier to feed it wet than dry it and ship it.”
Tiffany said livestock feeders who quickly develop expertise with feeding distillers dried grain will have a few good years ahead of them, while it is still discounted and competition for it is weak.
“It’ll be very cheap for a while.”
