Location Influences Economics of Feeding Distillers’ Grains
Nutritional value, distance, and delivered cost are all considerations of whether, and how, feedlots incorporate distillers’ grains into their feeding regimens.
There is a saying in real estate that the three keys to a successful sale are location, location, and location. You might say the same consideration influences how a cattle operation might benefit from using corn-milling by-product feeds – if there is any benefit. Generally, it depends on the operation’s location.
Considering the much-ballyhooed boom in corn ethanol production, and the associated increase in the availability of distillers’ grains as a livestock feed, a lot of people assume all cattle feeding operations now incorporate either wet or dried distillers’ grains in their finishing rations. If not all of them, at least the big feedyards must be using distillers’ grains. Not necessarily.
This past summer’s Beef Improvement Federation meeting, held in Fort Collins, Colo., included a tour of nearby Kuner Feedlot. With a capacity for nearly 90,000 head, it’s part of the Five Rivers Ranch cattle feeding group of 10 feedyards located in Idaho, Colorado, Kansas, Oklahoma, and Texas. Their combined capacity of some 750,000 head makes Five Rivers the largest cattle feeder in the world.
Visitors on the tour wanted to know the extent to which Kuner Feedlot was using distillers’ grains in its rations. Manager Nolan Stone said they really didn’t use any, with the exception of Five Rivers feedyards located closer to ethanol plants. For Kuner and others, the cost of transportation was too great. Another
consideration Stone cited was the relatively high sulfur content of distillers’ grains. The potential for raising total dietary sulfur to a toxic level can be a worry for feedyards whose water supplies contain
high levels of sulfur.
Location can determine the extent to which distillers’ grains affect a feedyard's nutrient management plan, too. A by-product of feeding cattle is manure, which has value as fertilizer. However, the typically high phosphorus content of distillers’ grains means feeding the product may result in more phosphorus being excreted in cattle manure. When the manure is applied to cropland as fertilizer, more acres may be required to adequately distribute phosphorus. In some locations, that may be a problem.
Chief Determinants
In the experience of nutritionist Steve Armbruster of Stillwater, Okla., the chief determinants of whether a feedyard uses distillers’ grains are nutritional value compared to other ingredients, the distance to a consistent source, and the delivered cost of the product. A feedyard consultant for 26 years, Armbruster and one fulltime associate work with central and southern plains-area feeders.
Because of lower transportation costs, says Armbruster, clients located close to ethanol plants typically use distillers’ grains, especially the wet product (wet distillers’ grains plus solubles) which may contain 65 percent moisture. “Close” is a relative term, but 40- to 50-mile hauls are not unusual. When distance and the cost of shipping wet distillers’ grains become prohibitive, low moisture, dried distillers’ grains may be more cost-effective. Armbruster says the point at which transportation becomes too expensive will vary because the actual purchase price of wet or dry distillers’ grains also varies by area. Suppliers located in regions with high concentrations of feedyards or dairies may price distillers’ grains higher
according to demand.
Demand fluctuates seasonally, too. Because more cattle are placed in the fall and fed through the winter, greater demand and increased prices for distillers’ grains typically follow. By-product feed ingredients become more cost-effective to use in the summer when demand declines.
According to Armbruster, costs of digestible energy and protein affect how much a cattle feeder might be willing to pay. Some of his clients are using distillers’ grains primarily as a protein source, at low inclusion rates (10 percent of the ration or less, on a dry matter basis), substituting for more pricey protein supplements. After protein requirements are met, distillers’ grains can be used at higher
inclusion rates, as a source of energy, replacing a portion of a ration’s primary energy source – typically corn.
“Now, some of our clients include (distillers’ grains) at rates up to 20 percent. That’s fairly conservative
compared to feeders located in areas where production of ethanol and by-product feed availability have
expanded most,” says Armbruster. “Another reason for our modest use of distillers’ grains is that most of our feedyards use steam-flaked corn. Most of the research involves use of distillers’ grains in rations based on high-moisture corn and dry rolled corn. There is some question whether by-products have the same value in a flaked corn ration.
“We’re still on the steep slope of the learning curve for using these products. Because of the variability of the products and how they associate with other ration ingredients at different inclusion rates, their impacts on ration cost and animal performance also vary,” he adds.
Impact on Performance
Calling it hard to make blanket recommendations for using distillers’ grains, Armbruster still relies on research findings to help guide their use in developing cost-effective rations that target optimum cattle performance.
Most research shows a positive response on performance from using distillers’ grains. University of Nebraska studies suggest that, compared to traditional corn-based rations, there is potential for a 20 percent improvement in average daily gain, and a 10 to 15 percent improvement in feed efficiency when feeding wet distillers’ grains at an optimum inclusion rate of 40 percent (dry matter basis). At an optimum level of 20 percent inclusion for dried distillers’ grains, performance nhancement appears to be slightly lower.
An economic analysis by University of Nebraska Livestock Marketing Specialist Darrell Mark says the inclusion of wet or dry distillers’ grains doesn’t always have a big effect on the cost of the ration itself. It depends on the relative price ratios between corn and the by-products in a particular market.
“For example,” explains Mark, “when valued at current (June 2007) Nebraska prices, the cost of a ration with no by-product ingredients (dry rolled corn and high-moisture corn, plus alfalfa and protein supplement) is around $172 per ton. If 30 percent of the corn is replaced with wet distillers’ grains (dry matter basis), the ration cost changes very little given that the wet distillers’ grains price is close to the corn price.”
According to Mark, the wet product price typically follows the price of corn, but usually is slightly less. Because the cost of transporting and mixing dried distillers’ grains is less than wet distillers’ grains, a ration using the dry product might be $3 to $4 per ton less in the Nebraska market.
Mark says the biggest economic difference can result from different impacts on performance, citing evidence that the greatest improvements generally result from feeding wet distillers’ grains. Even if ration costs do not change much, the increases in average daily gain and feed efficiency can be substantial.
“This decreases the number of days on feed, which helps decrease interest, yardage, and other costs,” states Mark.
He allows that using either byproduct, and particularly wet distillers’ grains, can involve some added costs associated with feed handling and mixing, as well as delivery to the feed bunk. To help producers evaluate how using by-product feeds might affect their overall profitability, the University of Nebraska developed Cattle CODE (Co-Product Optimizer Decision Evaluator)*. This economic budget model, in an interactive Excel spreadsheet format, accounts for performance advantages, as well as cost advantages and disadvantages, as they are likely to impact a specific operation. Use of the model is available, free of charge, at http://beef.unl.edu/ (click on “By-Product Feeds”).
“Certainly supply is increasing rapidly as more and more ethanol plants come online. But demand is also increasing as livestock producers – particularly cattle feeders – learn about and realize the performance improvements and profit increases possible from feeding ethanol by-products,” states Mark. “Based on current (Nebraska) feed ingredient prices, rations that replace 30 percent of corn-based control diets with either wet distillers’ grains or dried distillers’ grains can result in profit
increases of up to $40 per head.”
But with regard to profit potential, location matters. Nebraska research shows cattle feeding profits can be improved, even when wet product is transported 120 miles, due to substantially improved performance. But returns are largest, says Mark, for feeders located nearest to ethanol plants. Steve Armbruster says that fact has not gone unnoticed by his clients – the ones that feed cattle far from sources of distillers’ grains.
“If ethanol plants continue to be built close to where corn is grown, and cattle follow expanding supplies of by-product feed,” muses Armbruster, “it could change the cattle feeding landscape.”
*The University of Nebraska’s Cattle CODE (Co-Product Optimizer Decision Evaluator) was developed by graduate students Crystal Buckner and Virgil Breemer, agricultural economist Darrell Mark and animal scientists Galen Erickson and Terry Klopfenstein.