Ethanol production has the potential to make a huge impact on what and how we feed our country's livestock. If ethanol production continues to ramp up at the current rate, change will come like a fast-moving freight train, according to agricultural economists.

Livestock producers may face tighter corn supplies, especially in areas where ethanol production is concentrated. “There is a lot of concern about how the ethanol industry is going to affect livestock in general,” explains Jerry Shurson, University of Minnesota swine nutritionist and management specialist. “We've got areas in southern Minnesota that are corn-deficit areas right now, for example. If you are a pork producer buying your corn, you are competing with ethanol plants for that corn. Most ethanol plants I'm aware of have a breakeven price of $7.00 to $8.00/bu. for corn. If you are a livestock producer, you can't compete with that. It can be difficult to stay competitive.”

At the same time, a much larger supply of ethanol by-product feeds, such as wet or dried distiller's grains will be available for feeding. Beef and dairy cattle, as well as swine, can consume these by-products as a replacement for corn in rations.

Wet distiller's grains work well in cattle rations and are especially economical if the cattle are located close to the ethanol plant. Monogastrics, such as pigs and poultry, also can consume distiller's grains in rations, but must consume the dry form. Drying the product adds to the cost. And at this point in time, the distiller's grains are only included at a rate of about 10% of a typical swine diet. Dry distiller's grains can be stored indefinitely and are easier to ship to locations farther from ethanol plants.

Growing industry

“By-products from ethanol are having a bigger impact on the cattle industry than anything I've experienced during my 41 years with the university,” says Terry Klopfenstein, University of Nebraska animal scientist. The feedlot industry in Nebraska is already using a large portion of distiller's grains in rations. Klopfenstein expects that, as a result of the access to the relatively inexpensive feed, the cattle industry will grow in Nebraska. “I think we will run out of cattle before we run out of corn here, and I think the ethanol industry will offer an advantage for cattle feeders and beef producers in states like Iowa and Nebraska,” he says.

This can mean opportunity for beef producers and feeders. “We are seeing some evidence of a shift toward larger feedlots,” says John Lawrence, Iowa State University agricultural economist. “There appears to be a lot more interest in cattle feeding than a few years ago.”

Iowa officials are viewing the possibility of a growing cattle-feeding industry, thanks to the availability of ethanol by-products, as an economic development opportunity. The Iowa State University Value Added Agriculture Program and Iowa Beef Center recently teamed up to host an economic development seminar to assist lenders, economic development leaders and producers in exploring ways to work together to expand Iowa's cattle-feeding industry.

States that typically produce more corn than local livestock can consume, such as Iowa and Nebraska, see ethanol industry growth as a win-win-win situation. “The ethanol industry creates advantages for the corn farmer because it helps prices by taking care of the problem of surplus corn,” Klopfenstein explains. “It is a winning situation for the cattle feeders because cheaper rations [from feeding ethanol by-products] help make them money. The ethanol industry is nice for rural communities because good-quality jobs come to rural areas and are tied to economic development.”

However, among livestock producers located in corn-deficit states, there is some concern that there just may not be enough corn acres to go around. Some agricultural economists are getting a bit alarmed. “We think availability of corn will become a major issue,” explains Chris Hurt, Purdue University agricultural economist.

The National Corn Growers Association disagrees. “This is one of the big debates,” Lawrence says. “The National Corn Growers Association looks at the number of ethanol plants, both existing and under construction, then looks at increasing corn yields and says there is no problem. It's actually the rate of change that has people concerned, because corn yields are not expected to increase as quickly as the demand for corn for ethanol production.”

More corn acres

The economists who follow the ethanol industry are predicting the country will need a lot more corn acres. Some speculate more soybean acres will be converted to corn, as well as hay fields, pastures or even Conservation Reserve Program (CRP) acres as they become available. “A lot will depend on the economics,” Lawrence relates. “Right now it is tremendously profitable to produce ethanol. And corn can outbid soybeans, alfalfa and pasture for those acres as more ethanol plants come online.”

Lawrence says five years ago only one or two counties in the state of Iowa were corn deficit, meaning they had enough livestock to use all of their corn. “And that meant 97 counties exported corn to someplace else,” he states. “Now we are expecting around half of the counties in the state will become corn deficit due to ethanol production, if not the state as a whole. If that happens, we might not have enough corn to send to other states. The irony of it is that states like Oklahoma and North Carolina are building ethanol plants that are planning to buy their corn in Iowa, and there might not be enough left over.”

Deficit vs. surplus

As people look at the supply and use of corn, some project that ethanol production will cause corn prices to rise. Others think corn production will increase enough to meet most of that demand and large increases in price will not occur.

“We really don't know how this is going to play out,” says Iowa State University animal scientist Allen Trenkle. “And how that ends up will determine how we change feeding practices. It seems from our perspective right now to be a very large demand for corn going to fuel alcohol. So where is less corn going to be used? Are we going to feed less to livestock or export less? We don't know the answers to that yet. One end result is likely to be some increase in price of corn. Will the increase in price be enough that it is less economically feasible to feed livestock? Some people are projecting that might happen. If that is the case, we can still feed cattle and leave the corn out.”

Good for cattle and swine

Distiller's grains are low in starch content compared with grains, but they still contain the oil and fiber that were in the corn kernel. This is a high-fiber cattle feed, offering the advantage of relatively digestible fiber. “As nutritionists, we can look at this feed from quite a different way than we have looked at corn in the past,” Trenkle explains. “We can use these low-starch feeds to supplement a high-fiber [and lower-quality] feed. And I think we will see quite surprising performance as a result of that.”

Iowa State University researchers are conducting experiments in which they take all the grain out of feedlot rations and feed chopped cornstalks and wet distiller's grains. Early results indicate cattle are performing very well on the rations. “We've got feedlot steers gaining nearly 3 lbs. per day on this diet,” Trenkle says. “I don't know if this is the way cattle will be fed in the future or not, but we are doing the experiment because of the quantity of corn going to fuel alcohol.”

Distiller's grains complement low-quality roughages in cattle rations from a nutrient composition standpoint. Distiller's grains contain high levels of protein, energy and potassium. The concentration of phosphorus in distiller's grains is available to cattle at three times that in corn. “I think we can feed rather low-quality roughages and supplement them with distiller's grains and probably get along fine,” Trenkle says.

The pork industry uses primarily distiller's dried grain solubles, or DDGS, in rations, explains the University of Minnesota's Shurson. Although some may not think the by-products work in swine diets, Shurson has conducted extensive research with DDGS in all phases of swine production and believes there can be a place for DDGS in swine diets. The energy value is about the same as that for corn, because the fat gets concentrated. Many producers are including DDGS in grow-finish diets at around 10% of the diet.

Storage considerations

If cattle producers are feeding distiller's grains, the economics depend on proximity to the ethanol plant. Because the wet distiller's grains work best in the cattle feed, it can be expensive to haul the heavy, wet feed any distance. Often only large-size loads are available in semi-truck lots. Storage is an issue too. “Wet distiller's grain has a short shelf life,” Trenkle says. “You can't store it for more than two weeks without spoilage in the summer and maybe just a little longer in the winter.”

Klopfenstein has been conducting research into storage options, including bunker silos and silage bags, for distiller's grain products. “We have found if you mix hay or straw with distiller's grains you can get the grains to store better,” he notes.

132,000 tons

According to information from North Dakota State University, each bushel of corn used by an ethanol plant produces approximately 2.3 to 2.7 gal. of ethanol and about 18 lbs. of dried distiller's grains. A plant producing 40 million gallons of ethanol annually will use approximately 17 million bushels of corn and produce about 132,000 tons of dried distiller's grains annually.

This is enough by-product to feed 185,000 head of feedlot cattle per year, assuming a 15% dietary inclusion level on a dry matter basis.

CAPITALIZE ON OPPORTUNITY

Good planning will help you profit from ethanol's boom By Lora Berg

JOHN LAWRENCE, Iowa State University agricultural economist, says taking the following steps will help you prepare for the changes expected from the boom in ethanol production:

Do your homework

Distiller's grains will be readily available and nearby, at least in the Corn Belt. This will create a real opportunity that wasn't there before. What will you do differently to capture that opportunity? What do you know about the rations? What research do you need to know about rations to use this product?

Adjust your business plan

Things will be different two years from now than they were two years ago. If you have a business plan built around $2.00 corn or less than $2.00 corn, that is likely to be different in the future. The 2007 December futures for corn are at $3.00; the 2008 December futures for corn are at $3.35. What will you do to operate as efficiently as possible with higher-priced grain if you can't use an alternative?

Plan for possible pasture loss

If you are a cow-calf producer in an area where pasture may be bid over into corn, what are you doing to prepare to operate with fewer pasture acres? How can you use these co-products to stretch pasture? There may be more cornstalks available as we have more corn acres. Maybe you will have to look at harvesting cornstalks, mixing them with distiller's grains and feeding that to cows rather than putting up hay.

Learn about distiller's grains

Shop around. Products coming out of these plants differ tremendously. If one plant is using a different process, the product is different even though the products are both called distiller's grains and may both look the same. The moisture content, sulfur, phosphorus or protein content may differ.

Pay attention to manure management

Distiller's grains are higher in phosphorus than corn is, which could make slight differences in phosphorus excretion. The amount of manure nitrogen could differ too, depending on the levels fed in the diet. Be aware of these issues as you plan your manure nutrient management.