Masters of the Market

High-protein technologies are transforming the ethanol industry’s feed coproduct stream. Success will require more involvement in markets and closer relationships with end users. For those willing to put the time in, the payback could be significant.
By Lisa Gibson | July 15, 2020

FROM JULY 2020 ISSUE

The only way ethanol producers will get the optimal value—and return on investment—from high-protein feed is to commit to immersion in the feed industry, says Mallorie Wilken, technical consultant with ICM Inc. “This is very much a mind and industry shift in the ethanol industry to become part of the feed industry, if and when they install these technologies,” she says. “You’re committing to both of these industries.”

Interest in producing high-protein feed is growing in the ethanol industry, as Fluid Quip Technologies is already engineering its ninth installation of its Maximum Stillage Coproduct system, according to Keith Jakel, sales and marketing manager for FQT. ICM’s Fiber Separation Technology also is installed at about 10 plants. While DDGS have a place in the market as a commodity, high-protein, functional feed represents not only entirely new products, but new sales strategies and markets, as well. The value and revenue potential is enormous, but producers looking to make an investment and enter those markets should be prepared, Jakel and other experts agree.

“It’s a different product mix for the ethanol producers,” Jakel says. “Selling a high-protein feed ingredient isn’t as simple as hiring a marketer and just going out to a local farmer and saying, ‘Hey, we’ve got a high-protein feed.’ It’s a much more technical sale in the marketplace.”

Market Immersion
Instead of basing feed price on corn prices, high-protein feed producers become “price givers,” Jakel says. A much higher value and price can be placed on these novel feed products, he adds, if the producer understands their components and markets them appropriately.

Many ethanol producers Wilken has spoken with about high-protein feed in her two years with ICM have been unaware of the components in their current DDGS, she says. “In the large sense, most people just thought of it as a commodity instead of a feed source. They didn’t understand how great it was for cattle in fat and fiber, or how it can be a challenge for hogs in fat and fiber. It was very much a commodity mindset. We’ve really tried to teach ethanol plants about those changes.”

Animal feeders did their own research on DDGS to figure out how to make the best use of it, Wilken says. But with high-protein feed, the ethanol industry needs to commit to that research and bring it to the animal feeders. “Now, when we start specifying these products, we have to bring the research first,” she says. “So instead of having a market pull, we’re really pushing this into the market and showing value at the beginning to encourage the shift and the change, and bringing more value.”

As part of its market development for its Fiber Separation Technology, ICM has researched species-specific diet plans. “We’re trying to do that original cohort in having that info available for producers to give to their animal feeders,” Wilken says, adding that it can lead to more product consistency between plants, allowing for marketing on a national scale. “We’re trying to commit to that research so we can educate where to use it, how to use it, and what kind of performance those animal producers can expect.”

Todd Becker, president and CEO of Green Plains Inc., says Green Plains has assembled a team with significant experience in marketing to companion animal companies, pet food companies and aquaculture companies. Green Plains has added MSC at its Shenandoah, Iowa, plant and is selling into the pet food market. “You can’t just start producing this product and expect that you’re going to have a home for it,” Becker says. “It takes a lot of work and a lot of skill, and it takes time to develop a market.”

Green Plains will likely spend $3 million to $4 million per year on the marketing team, for full immersion in and commitment to its new market, Becker says. “This is working with the customer while they’re developing products around your product, and they have to understand that you’re going to be consistent with your quality, have quality control, quality assurance.”

It can take 12 to 18 months to get into some specialty high-protein markets, Becker says, adding that some end users have a two-year vetting period. Pet feed markets, for example, have intensely rigid specifications, and changing a pet food bag to reflect new ingredients is a massive undertaking, he says.

In addition, those end users want to know a high-protein ration will be consistent and redundant. If the plant goes down, the buyer needs to be able to get that exact high-protein product elsewhere. Quality control and assurance come into play in a pet feed or aquaculture market, as well, Becker adds. Trucks pulling loads need to be cleaned properly after the previous load, for example. Historically, the ethanol industry hasn’t had to spend time on these details with its DDGS coproduct. 

“You have to come in with a deep understanding of how this product will be marketed and who this product will be marketed to, otherwise you’ll never realize your return on investment,” Becker says.

Communication with animal feeders is crucial, Wilken says, as is avoiding the issues feeders experienced when ethanol producers started separating corn oil, thereby affecting feed content and weight gain. “We don’t want to repeat that,” she says. “We very much want to be engaged and the education source for those producers so they can trust what we’re going to be producing and have confidence in that.”

Ethanol producers tend to be disconnected from the end users, Wilken says. That will need to change in the new high-protein feed market.

Working with specifications of both industries, ICM’s goal is to improve the efficiency of the plant, and the quality of the feed, Wilken says. “If you’re not committing to both of those, there’s no point.”

Yeast Research and Role
High-protein feed systems are separating out and concentrating more protein than ever before, but they’re also pulling out the yeast portion more effectively. Many producers aren’t aware of the importance of yeast in feed, Wilken says. “The yeast isn’t vital to the protein portion,” she says. “But it has the cell wall components that really help in animal digestion and animal health.” Re-introducing that yeast portion opens specialized markets such as nursery pigs, to boost immunity, she says. “It provides a very low fiber, low fat that’s going to help really set them up for great performance.”

About three years ago, DuPont formed a focused program on developing enzymes and yeast that complement high-protein technologies, says Jaclyn DeMartini, scientist with DuPont Nutrition and Biosciences. “It’s been a reaction to the market saying there’s been interest growing and we see that continuing to grow going forward, especially with uncertainties going on in ethanol right now,” she says. “We think that high-protein coproducts, in general, is a direction that can add some stability and add some more value to the ethanol market.”

Enzymes and engineered yeast can be developed to complement high-protein feed technologies, allowing for increased protein content, improved amino acid composition, and expression of different compounds that are beneficial to the animal, DeMartini says. “You can really think of a large range of things that yeast has the potential to do, and since it’s such a large component of the protein coproduct, there’s quite a bit of potential there.”

DuPont has worked with nutrient and feed experts to better understand what the end user wants to see, and tailor its designs in enzymes and yeast. The work also could change the perception of feed products coming out of the ethanol industry. “It’s really important to educate that these high-protein coproducts are on a completely different level than what has been produced previously,” DeMartini says. “DDGS have plenty of advantages and are a great feedstuff, but we don’t want to put this in the same bucket. Producers will have to educate end users on what they’re selling. 

“This stuff will be lumped at a much lower price point, if they’re not able to distinguish this from DDGS and conventional coproducts.”

Still, livestock producers will want samples and trial time to experience the benefits for themselves, DeMartini adds. “There needs to be sufficient quantity produced to do that. Until we have hundreds upon hundreds of metric tons, it’s hard for them to take stock in what we’re telling them.” DeMartini adds that oversupply won’t be a concern. Becker agrees, citing the 320 million-metric ton demand for high protein, growing 12 million metric tons per year. That’s equivalent to every ethanol plant in the U.S. producing about four pounds per bushel of high-protein feed, Jakel says.

Investment and Involvement
Jakel says MSC is a game-changing technology for the ethanol industry, with a ripe market and product price point about three times that of DDGS. MSC brings $20 million in added annual revenue to a 100 MMgy plant, he says. That number is increasing, he adds, as a result of FQT’s marketing work and partners.

With an investment of $30 million to $50 million, it’s not a project to take lightly, Becker cautions. “Not everyone is going to focus on this because it’s not just turning it on and selling it.” For Green Plains, high-protein coproducts aren’t just about diversification, but the future of the company, Becker says. “Were making the investment now because we plan to roll this out to the rest of our plants.

“It’s exciting,” Becker adds. “It’s transformational. Some people don’t believe in it. I think when they see it at all of our plants and they see the results, they’ll start to believe in it.”

Wilken says, “This installation of any of these technologies is a commitment to the future of the ethanol industry and the feed industry.”

Author: Lisa Gibson
Editor, Ethanol Producer Magazine
701.738.4920
lgibson@bbiinternational.com