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DDG customers eye ethanol co-product

BROOKINGS, S.D. -- As world demand for corn rises and prices are potentially volatile, international customers look at dried distiller's grains from U.S. ethanol plants as an alternative.

BROOKINGS, S.D. -- As world demand for corn rises and prices are potentially volatile, international customers look at dried distiller's grains from U.S. ethanol plants as an alternative.

This message came clear from a pair of study delegations from Mexico and Japan in the region earlier this month, the latest in a parade of such groups in the last three years. One of their joint stops was a learning session Sept. 3 at South Dakota State University in Brookings.

Both came to the area through the U.S. Grains Council. The Mexican team was part of a Northern Crops Institute group that first had been in Fargo, N.D. They also took extra time with Poet L.L.C. in Sioux Falls, S.D., and elsewhere. The Japanese group also participated at the Midwest Shippers Association's Midwest Specialty Grains Show in Sioux Falls.

Patricia C. Esqueda Guadalajara, U.S. Grains Council technical director for Mexico, says Mexico already is the biggest importer of distiller's grains, using about 1.8 million metric tons of DDGs per year. Use in Mexico has grown about 50 percent annually for the past several years, she says.

If things go well, Mexican DDG use could increase to 2.8 million tons a year and will be a common feedstuff in Mexican beef and dairy diets, as well as poultry and fish. To compare, Mexico produces 26 million metric tons of feed per year on its own.

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Hiroko Sakashita, associate director for U.S. Grains' office in Tokyo, was leading a group of mixed interest -- some interested in DDGs, others in food-grade, identity-preserved grains. Sakashita says Japan used 230,000 metric tons of DDGs in 2008. Japan's use has doubled every year since 2004. The grains council thinks Japan will increase 300,000 metric tons for 2009 -- an increase but not as much as in the past. The Japanese are looking to use more DDGs for beef and dairy cattle, sheep, goats and poultry to keep feed costs down. One issue for Japan is that the DDGs typically are pelleted in the U.S. to make more them efficient to transport. Once shipped, these pellets must be crushed so the particles to be formulated into new pellets for Japanese livestock feeders.

Japanese customers are looking for technology in making better pellets, which the NCI and others are trying to develop.

Kazuaki Suzuki, a feed sales and development specialist for the National Federation of Agricultural Cooperative Associations in Japan, says that, among other things, he is looking for information on how to deal with the DDG tendency to "cake" or "bridge" in the vertical storage silos in Japanese ports.

Kim Koch, NCI production center manager who accompanied the Mexicans, says this is one of the technological problems U.S. producers are trying to help customers with -- adding affordable pellet ingredients, or changing the pellet presses and how they're run to increase pellet durability.

"It's about making meat, milk and eggs as economically as possible so you can have a product people can afford to buy," Koch says.

Feed accounts for 60 percent of the production costs for most livestock species. DDGs are affected both by the commodity corn price and by the price of competing proteins, especially soybean and canola meal.

Roberto Tellez Salazar, technical director for Trouw Nutrition of Mexico, says nutritionists there are taking a harder look at DDGs as option to cut feed costs. Some of those DDGs are coming from North Dakota and South Dakota.

"It's a problem that we're seeing that in many cases we don't know exactly where we are getting the DDGs," Salazar says. "But we have to use DDGs, especially from the U.S., for a good price. It's a feed ingredient we have to use."

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Producing high-quality, uniform DDGs hasn't been equally important among all ethanol producers, who initially were more focused on producing high-value ethanol. As ethanol fortunes have moderated, ethanol producers -- to survive -- are becoming more focused on DDGs as a "co-product" rather than a "byproduct."

Koch says this is important to U.S. farmers because the more value feed ingredients have for animal producers should be beneficial.

"Sometimes the grain producers focus more on yield. Having great yields keeps us in front of the wave of the expanding human population, but besides selling shell corn, we ought to have something else," Koch says.

Issues with U.S. DDGs

Antonio Renteria, who works for the National Research Institute for Forestry, Agriculture and Livestock and is a University of Mexico professor, says there is too much variability in sulfur content in U.S. DDGs. This results from ethanol plant operators using sulfuric acid to clean their equipment. The range in the DDGs is 0.4 percent to 1.3 percent of sulfur content, he says, and he claims he's only comfortable at the 0.4 percent level.

A second issue is nutrient variability. The biggest issue here is available lysine, which can be a limiting factor for feeding pigs or poultry, especially. Salazar says he'd like to see a nutrient profile of the DDGs that accurately estimates the nutrient values for proper ration making.

Third is mycotoxins -- especially aflatoxin.

One of the issues is the "corn is corn" mentality. Some regions, including the northern corn growing regions in the Dakotas, have fewer risks of mycotoxins, especially aflatoxin, because the climate here isn't conducive to the fungi that produce the harmful byproducts.

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"One of the main problems we've had in Mexico is that we don't know the source where the DDGs came from," Salazar says.

Many Mexican users don't purchase DDGs directly from plants, but instead from large commodities firms, which might get it from a variety of locations. That's changing, and more sellers are getting samples checked for quality.

Koch says the industry is looking for more sophisticated and affordable tests to rapidly test DDGs for nutrient quality, nutrient content, mycotoxin loads and sulfur content.

"If you could do that in 10 seconds, and have them repeated accurately, people would like that," Koch says.

He says some fuel ethanol makers, including Sioux Falls-based Poet, with its fleet of similar plants, are making a name for themselves in the DDG quality market.

Foreign buyers deal with brokers who aggregate DDGs from numerous sources, they have to rely on "letters of certification," which may not provide as much comfort.

Renteria says Mexicans also must be concerned about price.

"When you put DDGs at almost the price of corn, I'd rather use corn. Corn is a product I know and am more comfortable with and has other characteristics. But we know we are going to use more DDGs because of availability. All the world is using more corn -- especially India and China -- we are going to push other products. We see the wave coming, so we'd better prepare for the wave."

Will fish eat DDGs?

The Japanese study group wanted to see South Dakota State University's fish feeding trials with dried distiller's grains.

That makes sense because aquaculture sector is the fastest-growing sector in the feed industry. The Food and Agriculture Organization indicates that more fish was produced through aquaculture than was caught in the wild this year.

Travis Schaeffer, with the SDSU fish study team, says the studies are showing DDGs can be used within aquaculture diets. He says yellow perch have done relatively well on it, up to 40 percent substitution, which is relatively

high, compared with other livestock species. The perch have surprised researchers by using relatively high percentages even at their advanced growth stages.

"We're moving into other species -- perch, trout and others," Kurt Rosentrater, a U.S. Department of Agriculture says. "We're planning to spend a couple of years with each species and trying to see, initially, how they perform. We're trying to optimize the (feed) processing at the same time we're trying to optimize the dietary feed formulations."

An expanded, extruded pellet is similar to the consistency of Kix brand cereal, Rosentrater says. Screws inside an extruder mix the material, as well as frictional heating to "cook" it. He says studies started with tilapia because it was relatively easy for those fish to digest plant-based protein.

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