Circling New Opportunities

Ethanol Producer Magazine speaks with pet food industry consultants and representatives of the U.S. Grains Council to learn more about the challenges, benefits and opportunities in the growing aquaculture and pet food markets.
By Katie Schroeder | January 19, 2023

With the rise of technology that enables corn ethanol plants to improve the fiber and protein content of their distillers coproducts, the ethanol industry is looking for outlets for these higher-value outputs. Two industries that have been emerging as premier destinations for these enhanced coproducts are the pet food and aquaculture markets. 

Kent Cooper and Lisa Schole, co-owners of Evolve Consulting, explain the challenges of entering the pet food industry, the benefits of supplying it and key information producers should know before pursuing it. Evolve Consulting does ingredient and product development for the pet food industry.

As ethanol plants look to diversify their product streams, pet food appears to be a great fit for some of the distillers coproducts many producers are now making. However, entering any new market comes with its own unique challenges and requirements for entry, and the pet food industry is no exception.

The play comes with more scrutiny than supplying livestock feed due to more stringent regulatory requirements, high consumer expectations and media attention. “The livestock industry [is] very valuable, [and] the pet food industry is very valuable, but the way you get there, and the way people view them is very different,” Schole says. “A pet is fed more like a child and what [people] want to know about their pet’s feed is very similar to what you’d want to know about your children’s food.”

Market Challenges
One of the barriers to getting into pet food is the negative connotation corn has received within the pet food industry, making it difficult to get into certain tiers of products that are marketed around not containing corn, wheat or soy. “Until somebody changes the story, corn has an uphill battle to get through before it presents any of its data,” Schole says.

However, there is a sustainability story with coproducts, which gives ethanol producers some leverage to sell their product to the pet food industry. Plant-based proteins and sustainability are selling points that could help change negative perceptions about corn-derived pet food. “If you can check all the other boxes, people have a lot more reason to get on board, because it will also build a good story about what you’re using or not using out there in the industry as well,” Cooper says.

Because ethanol plants are not consistent across the board in how their process works and what enzymes, yeasts, cleaners and other elements are used in their process, it can be more complicated to get into pet food because every producer’s coproducts have slightly different makeups. Cooper explains that other ingredients used by the pet food industry, such as chicken meal, tend to be consistent across the board in how much protein and other components they bring to the table. Ethanol producers need to be able to stay consistent in the makeup of their high-protein coproduct—and some are—to allow pet food manufacturers to formulate their ingredients consistently.

Schole explains that in order to start conversations about selling to the pet food industry, producers need to have detailed information on the makeup of their high protein coproduct, at a bare minimum including protein, moisture, ash content, fiber and amino acid content. These numbers also need to be average values that the producer can meet consistently on a typical production day. This information is key since the pet industry needs minimum values to know what the product can bring to the formulation, and how it fits. “Tell me what you can do day-in and day-out and give me a spreadsheet that is realistic—not a pipe dream—[values] that you can actually say you can provide,” Schole says. “And then let us put it into formulas instead of pushing the upper limits of your process and [risking] coming in out of spec.”

For those serious about entering the industry, she recommends sending out the potential ingredients for certain types of testing, such as checking to make sure there are no residual chemicals or processing agents left, and testing for the palatability and digestibility of the ingredient, will help ethanol producers give the pet food industry assurances that adding the ingredient will be safe.

Schole also says that producers should be prepared to have their plant audited by potential buyers. Producers need to make sure they can answer questions about their process and provide a flow chart of it. She suggests that producers attend events for the pet food industry to gain a firm understanding of the terminology and build relationships within the industry.

It is important to identify what elements of a given coproduct might be attractive to the pet food industry. Cooper explains that protein is, in fact, among the most valuable components of pet food, and understanding what an ethanol producer’s coproduct can provide, whether that be fiber or protein, can actually help pet food manufacturers formulate to market needs with those characteristics in mind.
Breaking into pet food is a long-term play compared to livestock because if a producer can get their coproduct into a pet food producer’s formulation, they will have steady demand for that ingredient.

“Once you have an ingredient in there, it’s serving a purpose in that diet and subbing it out is hard,” Schole explains. The total volume will be different compared to livestock feed, since the size of the animal is significantly different, but the demand will be consistent, and the value should be notably higher.

Benefits of the Pet Food Market
One of the attractive features of the pet food industry is the stability of the market. “Commonly, in the pet food industry, we say that we are as near of a recession-proof industry as you can find,” Schole says, explaining that even in hard times, people want to own pets and take care of them.

If a producer is able to get into the ingredient deck, they are in for the long-term. The pet food industry is growing steadily, five percent year over year, and if a producer is able to get in, they will be able to grow with it.

“As a whole, there [are] a lot of supply issues right now, with raw materials. So, if somebody had a lot of really good data, there is, in my opinion, not a better time to try to get into the market if you know you have a consistent supply at a reliable price that checks all those boxes,” Schole says.

Aquaculture Opportunities
Ronnie Tan, regional aquaculture consultant for the U.S. Grains Council, and Caleb Wurth, regional director for Southeast Asia and Oceania, outline the state of the aquaculture markets around the globe and explain what it takes to pursue these opportunities. Tan explains that the ethanol industry is consistently able to provide three “high value meals” including DDGS, high protein coproduct and corn fermented protein.

The opportunity for ethanol plant products in the aquaculture industry is high due to consumers wanting sustainability from aquaculture and the rise of input costs, Tan explains. “The aquaculture industry is growing at an impressive rate. Efficient feed-to-gain ratios in farmed fish and cultural affinity to the consumption of seafood has led to a global trend toward farmed aquaculture,” he states.

The three species within aquaculture that have a high demand for feed include shrimp, salmon and tilapia. Tan and Wurth explain that the demand for shrimp is centred in Asia and Latin America reaching 7 million metric tons. “The crude protein in the feed can range from 28 percent for economy feed to 38% for the premium high-density feed. For juvenile feeds, crude protein can reach 44,” he explains. Corn fermented protein products have great potential as an ingredient for both shrimp and salmon. Currently, the feed for both utilize fish meal, corn gluten meal and various plant meals.

The salmon market is at 3.3 million metric tons with 50 percent of that demand being met by Norway, followed by Chile and Scotland. Salmon feed is the most expensive per kg, with a crude protein of 40 percent to 48 percent dependent on the salmon’s life stage, Tan and Wurth explain. The global feed demand for tilapia is nine million metric tons yearly from China, Egypt, Indonesia, Brazil and Bangladesh. “Although it can be a fish for food security, it is the fish for export that consumes the majority of the feed. Crude protein ranges from 28-32 percent,” Tan states. “Feed prices are cheaper than that for shrimp or salmon and the protein ingredients tend to be plant based.” Ethanol producers may be able to sell both DDGS and corn fermented protein products into this market.

The challenges producers face on entering the aquaculture market include a lack of data on fish resistance to mycotoxins as well as a general lack of research on distillers grains coproducts in aquaculture feed, poor past experience, filet discoloration and high variability.

However, Tan and Wurth also outline the strengths these coproducts bring to the aquaculture market, including the protein components they can contribute, available phosphorous, yeast and beta-glucans, xantophyll and more. Producers that want to participate in the aquaculture market globally will need a certificate of analysis at point of export, Tan explains. “This commercial requirement would include approximate nutrient levels and mycotoxin detection. Some markets such as Thailand and Vietnam also require fumigation before export,” he states. “Particular import requirements are often country specific.”

For producers interested in entering the aquaculture market, the USGC offers several different resources. Tan and Wurth explain that the USGC has done peer-reviewed research trials demonstrating that shrimp fed with up to 15 percent DDGS show good performance. They have also completed research regarding the digestibility of DDGS for both shrimp and tilapia, both of which will be published in 2023.  The USGC also has extensive knowledge on the aquafeed markets in Southeast Asia and is building up more information on other regions as well. Tan is personally capable of helping feed producers formulate their feed to include DDGS. “One of USGC’s role[s] is to increase aggregate demand for DDGS and high protein/corn fermented protein in the aquafeed market,” Tan states. “We work along the value chain to create a push effect at the feed mill level and a pull effect from the farmer level. We also assist by bringing U.S. producers and the aquaculture industry together in the Southeast Asia region today.”

The opportunities for high-quality coproducts derived from corn ethanol production are plentiful, but education on what is needed to enter these markets is key and seeking expert advice is a good first step.

Author: Katie Schroeder
Contact: [email protected]