Adapting to low-corn oil DDGS in the marketplace

It’s well known that corn oil extraction provides ethanol plants with an additional source of revenue and there’s a fast payback on capital costs.  Clearly, ethanol plants realize the benefits and are jumping on the corn oil extraction bandwagon in increasing numbers.

However, as the industry evolves, some consequences are making themselves known.  What do I mean by consequences? Well, first let’s look to the impacts of texting and twitter as an example. Although there are many positives to both, the two technologies arguably contribute to the ever shortening attention span of today’s society. Secondly, though designed to help us communicate, these technologies have created a category of individuals that cant seme 2 spel or use good gramer to save there lifes.

How does this apply to crude corn oil? Well, one consequence of increased use of corn oil extraction is that—as it enters the market in increasing volumes—the price will be driven down. In writing an article about opportunities for the ethanol and biodiesel industries to work together due to corn oil extraction, I talked to a marketer that felt the industry was reaching that tipping point. (The article, “Golden Possibilities,” is online at ethanolproducer.com.) Of course, it’s possible, as the market for corn oil develops, that new uses for the product will be discovered.

Another consequence of corn oil extraction is that it changes the makeup of the distillers grains produced. In the last couple years more than one source has told me—in a general way—that ethanol producers need to consider their markets when considering corn oil extraction. In other words, distillers grains that has had its corn oil removed, creating a high protein, high fiber feed product, might be not at all desirable, depending on its end use.

That was confirmed to me last week when I posted a story after talking to Eduardo Beltranena, feed research scientist for Alberta Agriculture and Rural Development. Beltranena pointed out that removing corn oil from U.S. distillers grains turns it into a feed product with the same low oil content as Canadian produced wheat distillers grains. That means, for swine and chickens, low-corn oil distillers grains from the U.S. loses its competitive edge in Canada, since those animals need the oil for energy and don’t easily or efficiently convert protein and fiber. “The oil content, that’s what we care about the most,” he said of U.S. corn distillers grains. In other words, swine and chicken producers are not willing to pay a premium for corn distillers grains imported from the U.S. unless the seller certifies it has a minimum of 10 percent fat content. Distance transported is a factor since freight costs will add to the total price.

Lest it’s misunderstood, this doesn’t mean low-corn oil distillers grains isn’t still an attractive feed ingredient. And, in some cases, a high protein, low corn oil product could be more desirable, not less. Although I admit I need to do some more research on the subject, I’ve heard anecdotally that the product is best suited for cattle, possibly particularly dairy cattle. That’s a topic I intend to write future stories about. In the meantime, however, that general conclusion seems to make sense, since DDGS are well known to work best in ruminant diets in the first place.

What it does mean is that it’s possible that not every ethanol producer will benefit from aggressively pursuing corn oil extraction. Some producers may find a ready market for high-protein, low-corn oil distillers grains while others may dial back corn oil extraction or not implement it at all, in order to provide customers with distillers grains containing at least 10 percent corn oil. Just like texting and twitter, it’s not desirable or feasible to rewind progress—the technologies are obviously here to stay. It’s simply a matter of recognizing and adapting to new realities.