Co-products have a number of physical characteristics that present logistical issues for livestock producers using them in feed rations. These characteristics, as well as some chemical characteristics, make transporting, handling, feeding, and storing co-products challenging.
The biggest obstacle to providing co-products to livestock feeders is transporting the feeds from the processing plant to the livestock feeding operation. Depending on the co-product's final processed form, varying degrees of difficulty occur in loading, shipping, and unloading. Moisture in the co-product can cause spoiling and depreciate nutritional content, particularly in the summer when temperatures are higher. The shelf life of high-moisture feeds can, therefore, be relatively short.
High moisture content also makes the co-product more difficult to handle for shippers. Shipping a high-moisture feed adds to the total weight of the shipment, and product consistency can cause the co-product to stick to the containers, causing difficulties in the unloading process. Generally, the lower the moisture content, the easier it is to transport co-products.
However, removing moisture from co-products requires large, capital intensive dryers and increases energy costs. In addition to the cost of drying, exposing co-products to high temperatures increases the risk of scorching, which can reduce the nutritional content and the overall value of the feed. In some cases, livestock producers feeding low-moisture co-products find animals exhibit lower feed efficiency, which the producers remedy by putting water back into the feed. Drying costs account for most of the price differential between co-products that differ only in moisture content.
Typically, U.S. livestock operations where co-products are used are larger operations (USDA, NASS, 2007). Such operations can use larger quantities of co-products on a regular basis, providing ethanol plants with a continuous and consistent market for their co-product production. Cattle feeding operations where co-products were used averaged 76 percent larger than all cattle operations (1,276 head vs. 725 head) (USDA, NASS, 2007). Hog operations using co-product feed were over three times as large as average operations (10,957 head vs. 3,256 head). One reason for this size differential is that co-products need to be transported from the ethanol production facility as soon as possible to make room for the next batch of co-products, in order to maintain peak ethanol production. Livestock feeding operations that can make use of full truckloads of co-products are more easily able to work with ethanol plants to obtain co-products on a regular basis at attractive prices or perhaps even contract for delivery.
Based on 2007 NASS survey results, larger cattle feeders near plants may have been the best customer for co-products because (USDA, NASS, 2007):
1. Cattle feeders report prices at a discount compared to dairy, hog, and cow-calf operations.
2. Cattle feeders report using co-products with the highest moisture content.
3. Cattle feeders report that they receive the fewest services from co-product suppliers, compared with other cattle operations, and they are twice as likely to order their feed directly from a processing plant.
Erickson et al. (2007) observed that returns per head decrease with the distance needed to ship a given proportion of Cargill's Sweet Bran used in cattle feeding rations, especially if the distances were at least 100 miles from an ethanol plant. Similar results were observed in another Nebraska study (Waterbury et al., 2009). These findings may also reflect the ability of cattle to grow to slaughter size more efficiently on feed with WDGS compared with feed efficiency when cattle are fed DDGS, as well as the fact that co-products are less expensive prior to incurring drying costs.
Since the movement of co-products offsite facilitates ethanol production, ethanol manufacturing plants are anxious to market and transport the co-products as quickly as possible. The most economical situation for ethanol producers is to be able to ship large amounts of high-moisture co-products for short distances, thus, avoiding drying costs as well as maintaining nutritional content and limiting spoilage. Livestock operations situated within 100 miles of ethanol plants therefore have an advantage in being able to obtain and use co-products efficiently.
Transportation technologies are constantly being introduced and improved. For example, unit trains (such as 90- or 110-car trains dedicated to a single type of traffic), are being used to ship co-products to specific locations. Some milling/processing plants have built specialized rail track loops and unloading facilities to move their co-products. Some are able to unload special railroad cars without decoupling them, and rotate the entire car upside down, to dump co-products into pits from which they can be redistributed or mixed with other feed ingredients and fed to livestock.
Most U.S. livestock producers buy their co-products on the spot market and prefer not to buy under contracts (USDA, NASS, 2007). Contracting for co-products may result in a more reliable supply source. In a study focusing on Nebraska cattle feeders, who are generally close to ethanol plants, most co-product was sold in 2007 on a fi xed-price, annual contract basis (Waterbury et al., 2009). However, in 2008, the absence of contracts between ethanol producers and livestock operations may have been motivated by ethanol plants (Mark, 2009). Cost may not be the only reason producers would contract their co-products; consistency and quality of the co-products are also concerns.
Co-products' quality and content can vary as processors make adjustments in order to optimize production. Because the feed is a byproduct of the processing plant, the nutrient contents of the feed may vary, based on a number of factors in the production process of primary starch related products and oils. However, as the profi t margins from ethanol production decline, ethanol producers have made more efforts recently to manufacture feed co-products that are consistent in quality and content, which can sell at a premium.
Education among livestock operators about how to use co-products as animal feed appears to be a determinant in the widespread use of co-products. Although most respondents in a NASS survey stated that lack of availability of co-products was the primary reason why they did not feed co-products to their animals, 5 percent of producers in every livestock category cited lack of knowledge as the primary reason (USDA, NASS, 2007). There is potential for more co-product use if U.S. livestock operators become more knowledgeable about how best to manage ethanol co-products as animal feed.
Considerations for the Future
The use of co-products in feed for U.S. dairy, meat, and poultry production will be affected by a number of competing factors. The development and growth of the ethanol industry will affect the availability of corn for feed, increasing competition in the corn market. As the ethanol industry grows, there will be a corresponding increase in co-products available to substitute for corn in animal feed.
Ethanol production increased 232 percent between 2003 and 2007, rising from 2.8 billion gallons to 6.5 billion gallons (table 2). The Energy Independence and Security Act of 2007 established the Renewable Fuel Standard (RFS) which mandates the use of biofuels at 11.1 billion gallons in 2009 rising to 36 billion gallons in 2022. Some of the 36 billion gallons is to come from cellulosic ethanol and other advanced biofuels. The maximum amount of corn-based ethanol that can be used to meet the RFS increases from 9 billion gallons in 2008, to 15 billion gallons in 2015. If all 15 billion gallons were produced from dry-milling corn, as much as 98 billion pounds of DDG could be produced from 5.6 billion bushels of corn.
Co-products add to the options available to informed livestock producers to develop the best feeding strategies possible. Increased education of and outreach toward livestock and poultry producers about how best to use co-products as animal feed will influence how operators adapt the new co-products to future feed rations. New information on co-products' nutritional values, distribution possibilities, and other aspects will be disseminated to the livestock industry through extension offices and publicly available research, among other forms of communication.
Source: Ethanol Co-Product Use in U.S. Cattle Feeding: Lessons Learned and Considerations / FDS-09D-01 - Economic Research Service/USDA (abstract)
Authors: Kenneth H. Mathews, Jr., and Michael J. McConnell