September 28, 2009
Canadian imports of ethanol byproduct may be nearing plateau
Western Canadian cattle producers are increasingly importing distillers'' dried grains with solubles, a byproduct of corn-based ethanol production, from the US for use in livestock rations. But as the cattle herd declines, imports of the feed ingredient may hit a plateau.
Canada imported 633,647 tonnes of distillers''; dried grains with solubles, or DDGS, in the 2008-09 marketing year, which ended July 31, according to Statistics Canada data. That figure is higher than the 607,535 tonnes imported the previous year and well above the five-year average of 319,178 tonnes. Imports of DDGS have increased significantly in the past few years, as US ethanol production has also increased, leaving more of the cheap feed ingredient to be marketed.
Dave Guichon, a feed merchant with Ag Value Brokers in southern Alberta, said there were "decent volumes" of DDGS coming into southern Alberta from the US He said many feedlots were booked with DDGS through December after making purchases over the summer.
Guichon added that the large US corn crop, together with the fact that the ethanol business is picking up, will mean that the resulting DDGS will need to go somewhere. He expected they would continue to be priced into Canadian rations, especially as the good harvest weather will likely result in lower feed wheat production in western Canada.
While he expected imports of DDGS to remain large, Guichon thought the market may have reached its plateau. "You can only put so much in," he said, noting that DDGS usually only makes up 15 to 20 percent cattle rations. In addition, Guichon said the number of cattle on feed in western Canada has been on the decline.
Adam DeLawyer, a DDGS merchant with the Minneapolis-based CHS Inc., agreed that some Canadian feedlots may have maxed out how much DDGS they can put in their rations. But, he said other cattle operations haven''t used DDGS in the past and could be looking at them now. "I think there is still room to send more DDGS in," said DeLawyer.
CHS Inc. is a major exporter of US DDGS into the southern Alberta cattle feeding markets.
From a pricing standpoint, DeLawyer said the expectations for a large US corn crop and increasing ethanol production has buyers looking for DDGS prices to go down. However, the winter months are the traditionally strong demand period for DDGS and prices normally go up during that time. While sales have slowed down in recent weeks as some ethanol plants shut down for fall maintenance, DeLawyer said the two sides were already finding some common-ground and thought business was picking up once again.
