(Resource News International) –– Distillers dried grains with solubles (DDGS), a byproduct of ethanol production, have taken up a larger and larger portion of Canadian livestock feed rations in recent years, with most of those supplies coming by way of the U.S. ethanol sector. While Canada is currently on pace to import a record amount of corn based DDGS from the US in 2010, the nearby demand is starting to slow down.
During the first six months of 2010 Canada imported just over 500,000 tonnes of DDGS from the U.S., nearly double the level brought in at the same point the previous year, according to data compiled by the U.S. Grains Council. Canada imported a total of about 820,000 tonnes of DDGS from the U.S. in 2009, and could surpass that level in 2010.
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Ryan Slozka, senior commodity trader with Rycom Trading Ltd., Canada’s largest importer of DDGS from the U.S., said the spread between DDGS and barley has started to widen, with the recent strength in corn market lifting the prices for DDGS as well.
Canadian livestock feeders will pay up to 20 per cent more for DDGS over barley and will increase their demand as that spread narrows. Slozka said DDGS moving into Alberta were currently trading at about 18 per cent above barley, which is on the wide side.
Slozka said DDGS were currently priced into Alberta around the $190 per tonne range, while barley was in the $160s.
“Most of the feedlots are sitting back, they don’t want to lock in at these wider ranges,” said Slozka. With a lot of grass in Alberta this year, he added, the end-users do not need to aggressively bring in feed supplies just yet, “so the feedlots are playing a wait-and-see game.”
Overall, Slozka said DDGS would remain in Canadian livestock rations, but the volumes over the next few months will likely be down from where they were in the last quarter.
Imports of DDGS will also depend on the Canadian wheat harvest. If the wet fall leads to large supplies of feed wheat, that will influence what the feedlots do in terms of bringing up DDGS, said Slozka.
The Canadian Wheat Board’s feed barley export program will also come to play in determining just how much DDGS find their way into Canadian livestock rations.
The increased export demand this year should bode well for barley prices. Higher barley prices would cause the spread to narrow with DDGS, making the imports more economical, said Slozka.
