Researcher: Low corn oil DDGS less competitive in Canada

By Holly Jessen | December 29, 2011

With U.S. ethanol plants adding corn oil extraction in increasing numbers, about half the distillers grains coming into Canada is a low corn oil product, said Eduardo Beltranena, feed research scientist for Alberta Agriculture and Rural Development. For the Canadian swine industry, especially in Alberta and Saskatchewan, that makes it a less desirable and less cost-competitive product. “We’re basically now being very clear with pork producers that they need to determine what is going to be delivered,” Beltranena told EPM. “They have to have a contract and the contract has to specify a minimum of 10 percent fat. If [ethanol] plants cannot guarantee that, we basically just forget about it—it’s not going to make it to Western Canada, to Alberta and Saskatchewan.”

Before corn oil extraction became widely used by the U.S. ethanol industry, corn DDGS, with its higher oil content, had a competitive advantage to wheat DDGS, primarily produced at Canadian ethanol plants. Wheat and wheat-corn blend DDGS yield a product with 36 percent protein content, he said. On the other hand, corn DDGS produced in the U.S. has more than twice the fat content, or 10.5 percent, than wheat DDGS. Corn DDGS that has had the corn oil removed, however, is comparable to the oil content in wheat DDGS, at 5 percent.

For swine diets, which should be formulated on the basis of net energy, high protein, high fiber DDGS isn’t as desirable as high-oil corn DDGS. “We just lose too much in the process of digestion, and only about one-third of the energy is then available to the pig,” he said, adding that chickens, another monogastric animal, are in the same situation.

It’s the cost of transportation that’s the kicker. In general, Ontario and Quebec source their DDGS from the corn-ethanol plants in far southern Ontario, located east of Michigan. British Columbia is closest to corn-ethanol plants in California while Manitoba and western Ontario aren’t far from ethanol plants in North Dakota. Two providences, Alberta and Saskatchewan, aren’t very close to any corn-ethanol plants.

In other words, the further away from corn-ethanol plants that produce DDGS, the bigger the cost spread between low corn oil corn DDGS and wheat DDGS is likely to be. “Once you get into the prairie providences, you’d be competing with wheat DDGS, which has a higher protein content and it will probably have a little less oil than the corn DDGS, the new reduced oil corn DDGS,” he says, adding that,  “If you cost it on grams of available lysine, there are other lysine sources that are cheaper.” That list includes canola meal, wheat DDGS and even soybean meal imported from the U.S.

It all depends on DDGS price, of course. Recent prices put corn DDGS at $265 a metric ton and wheat DDGS at about $180 a metric ton. Back in September, however, corn DDGS was $228 a metric ton. “In the western providences, Saskatchewan and Alberta, it will come in and out of the diet,” he said.

Assuming swine producers purchase corn oil DDGS that has not gone through the corn oil extraction process and depending on price, Beltranena published a fact sheet in November that demonstrated cost savings for feeding DDGS, both wheat and corn, as the DDGS percentage increases in the ration. Based on September prices, he found $7.78 in savings per 1,000 kilograms, for every 10 percent increase in wheat DDGS in the ration. For corn DDGS, the savings was $6.69 per 1,000 kilograms, for every 10 percent increase in the ration. See tables 2 and 3, published with this story, for additional details.