Monday, November 22, 2010

The Distillers Grains (DDGS) Export Market


My post on U.S. ethanol exports two months ago touched upon the subject of DDGS (distillers dried grains with solubles) exports. See "How Much Ethanol is the U.S. Exporting and Why?" In this post, I'd like to focus more exclusively upon our growing DDGS oversupply, since policy debate on the corn ethanol tax subsidy is timely.

This year 37% of the corn produced in the U.S. will be used to manufacture ethanol. Recently released USDA tight corn supply estimates resulted in an expression of concern by the United Nations regarding global food security and affordability.

DDGS product is most commonly used as fodder for ruminant livestock. Worldwide, the animal feed industry consumed 635 million tons of fodder in 2006.

According to the Renewable Fuels Association, a lobbying group for the U.S. ethanol industry, US dry mill ethanol producers are forecast to produce 33.5 million tonnes of distillers grains with a value of about $4.5 billion in 2010/2011. The U.S. market for the product is only 24 million tonnes. That means that we have a surplus of 27% of DDGS product here in the U.S.


Renewable Fuels Association President and CEO Bob Dinneen is now comparing the ethanol "blend wall" to a DDGS "feed wall" and suggests that growing an export market for DDGS's is key to the survival of the U.S. ethanol industry. Revenues for selling DDGS product are used to buy new corn used by the industry.
  • One-third of ethanol production ends up in the form of DDGS product.
  • DDGS exports hit new highs this year with the expectation of exporting 8.5 million metric tons, or 28% of product. In 2009 we exported 5.65 million tons.
  • China imported 40% of the July DDGS export product.
  • In 2009, approximately 39% of DG was consumed by dairy cattle, 38% was consumed by beef, 15% consumed by swine, 7% by poultry, and 1% by other species (sheep, aquaculture).
  • The amount of distillers grains produced in 2009 is equal to the amount of grain fed to the cattle in American feedlots.

In conclusion, here is a very recent chart showing export and useage figures for DDGS product:

Agricultural Marketing Resource Center

The production of DDGS product is taxpayer-subsidized, due to a stated national goal of decreasing our dependence upon foreign oil. The $.45 per gallon federal subsidy expires the end of this year and is currently being debated by various politicians. The taxpayer supports the industry in many other ways, as well.

wikipedia: distillers grains

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