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Practical And Economic Implications Of Feeding Ddgs In Western Canada

Speaking at a special conference this past summer in Lethbridge, Dr. Darryl Gibb, innovation and business development specialist with Viterra at Lethbridge, and Dr. Barry Robinson, nutritionist and owner of Great Northern Livestock Consulting at Westlock, Alta., took a look at the practical and economic implications of feeding dried distillers grains with solubles (DDGS) to feedlot cattle.

Robinson and Dr. Tim McAllister of Lethbridge Research Centre cochaired the conference sponsored by Alberta Livestock and Meat Agency, Agriculture and Agri-Food Canada, and the U.S. Grains Council. It was a one-time event focusing on DDGS to spotlight research findings from the western provinces and the northern states and their application in the feeding and management of DDGS in Western Canadian feedlot diets.

Though the economics of feeding DDGS doesn t generally compute favourably for cow-calf producers, Robinson says this co-product from ethanol production is used extensively in the swine industry, as a high-quality protein in the dairy industry and, in recent years, has become a valuable source of energy and protein in back-grounding and finishing beef cattle, particularly in southern Alberta. As you go farther north, DDGS becomes less viable as a feed ingredient because of transportation costs.

The vast majority of the supply comes from corn ethanol plants in the northern states, which are producing an abundance of corn-based DDGS relative to the production of wheat-based DDGS from wheat ethanol plants in Western Canada. Most of the DDGS fed in feedlot diets is the dry form of the product. Feedlots in close proximity to ethanol plants can utilize DDGS in the wet-cake form, which is higher in energy and generally priced lower than dry DDGS on a dry-matter basis because of energy savings on dehydration at the ethanol plant.

The supply of DDGS from the U.S. plants is fairly consistent, so demand is a major price determinant. The price of DDGS follows the corn market more closely than the barley market, Robinson explains. In the summertime, demand for corn DDGS tends to decline, which favours a lower corn DDGS price.

Neil Campbell, general manager of Gowans Feed Consulting and the Canadian representative to the U.S. Grains Council, provided Robinson with the monthly prices for barley and 90 per cent dry-matter corn DDGS delivered to Lethbridge from January, 2010 through May, 2011. Corn DDGS ranged from a low of $160 per tonne, which was very close to par with barley for the month of July, 2010, to a high of $254 per tonne in March of this year, when it was 29 per cent higher than rolled barley.

Plugging the monthly prices into a profit projection model, Robinson computed the relative profitability of feeding corn DDGS in finisher feedlot rations. During 16 of the 17 months, purchasing and feeding corn DDGS at a 20 per cent inclusion rate was profitable in finishing feedlot cattle in the Lethbridge area, he says. Feedlots can pay up to 25 per cent more for high-quality corn DDGS than rolled barley prior to breaking even on this feed ingredient.

Unlike feed grains, DDGS, even in the dry form, isn t a feed ingredient that can be purchased during a downswing in the price and stockpiled for long periods in a bin. Due to the high fat content, it may stick to bin walls and, in the worst-case scenario, it will cake and harden in the bin. Flat storage is recommended and under cover, if possible.

Robinson also stresses the importance of knowing what you are buying. High-quality DDGS will be golden brown in colour, not dark or burnt looking. Typically, the fat content is nine to 12 per cent, though some plants have found other uses for the fat and are now partially defatting DDGS. His best advice is to purchase DDGS through a reputable supplier and communicate with the supplier regarding the minimum fat guarantee and maximum mycotoxin level.

THE VALUE OF DDGS

Gibb points out that the market cost of DDGS and the value of DDGS in a ration are two different matters. Though the cost of DDGS usually results in an increase in the total cost of the ration, the higher energy value of corn DDGS substituted for some of the barley grain in the ration can reduce the overall cost of gain.

Corn DDGS is generally 12 per cent higher in net energy (NE) than barley and the NE of wheat DDGS is similar to that of barley grain. Knowing that energy intake drives performance, nutritionists use a standard equation to predict performance based on energy content of the feed for the purpose of estimating its value.

It s important to remember that the value of DDGS changes with the inclusion level in the diet, Gibb says. Numerous studies suggest that the efficiency of utilization of DDGS declines as the inclusion level increases above 20 per cent of the dry matter (DM) content of the diet.

Typically, when corn and, or wheat DDGS is added to a ration at the 20 per cent level, daily consumption tends to increase somewhat, but the improvement in average daily gain (ADG) and the feed-to-gain (F/G) conversion can be significant. At a 40 per cent inclusion rate, intake and rate of gain increase a bit more, but feed conversion drops off. Bumping it up to a 60 per cent inclusion rate has a negative effect on the ADG and feed conversion because of the reduced digestibility and a corresponding decrease in NE of the diet.

A 2007 study by Buckner et al shows the value of corn DDGS relative to barley grain priced at $210 a tonne and silage (38 per cent DM) worth $60 per tonne. The biggest bump in performance came with the first 10 per cent of DDGS added to the ration, therefore, the value of the DDGS in the ration was greater and the producer could afford to pay more for it at that rate than when including it at the 20, 30 or 40 per cent rate. Compared to the ration without DDGS, including DDGS at the 10 per cent rate resulted in an improvement in ADG from 3.30 to 3.55 pounds and the F/G dropped from 6.17 pounds of feed per pound of gain to 5.84, pegging the value of the DDGS in the ration at $345 per tonne. If the producer paid more, he would be losing profit. At the 20 per cent inclusion rate, ADG increased to 3.70 pounds and the F/G dropped another notch to 5.65, however, the value of the DDGS in the ration decreased to $320 per tonne. This is because F/G, which is the economic driver, was improved by 5.4 per cent with the addition of the first 10 per cent of DDGS and adding another 10 per cent improved the F/G by only 3.3 per cent. At the 40 per cent inclusion rate, ADG dropped off to 3.51 pounds and the F/G increased to 5.95, therefore, if the producer paid more than $234 per tonne for the DDGS, he or she would have been money ahead feeding barley grain and silage.

The bottom line is that as the price of DDGS climbs, we may need to consider reducing inclusion, Gibb explains. When the price is on par with barley, I d feed at least 30 per cent. When it is at a premium to barley, I wouldn t feed any more than 20 per cent.

The value of DDGS in a ration is even greater if it replaces some of the silage as well as some of the grain, he adds.

As illustrated in the accompanying example, the value of corn DDGS is $251 per tonne when it replaces 20 per cent of the barley in a ration, and jumps to $262 per tonne when it replaces 15 per cent of the barley and five per cent of the silage (relative to barley at $210 per tonne and 38 per cent DM silage at $60 per tonne).

Gibb formulated three rations with the same cost of gain 74 cents per pound. The control diet was 86 per cent barley grain, 10 per cent silage and four per cent supplement. Two diets contained corn DDGS at the 20 per cent inclusion rate.

Option one was to reduce the barley grain to 66 per cent and keep the silage the same as that in the control diet. The second option was to reduce the barley by 15 per cent and the silage by five per cent. The cost of the DM per tonne was lowest for the control diet, however, the cost of gain worked out to be equal for all three diets because of the predicted improvement in ADG and F/G resulting from the addition of DDGS.

This example illustrates a second important point. Including DDGS could provide greater flexibility in formulating rations because it can replace a portion of the grain and, or silage.

Gibb adds that, because part of the starch is being displaced by fibre, fat and protein when DDGS is included in the ration, producers could be more aggressive when processing the grain. That is, they could tighten the roller so that none of the kernels remain intact without the worry of increasing the potential for digestive upsets.

Gibb s final word of advice is to consider all costs alongside the above-mentioned benefits when assessing the value of DDGS in your feeding program. On the negative side, you will have an additional feed ingredient to manage and handle every time you mix a load and storage losses can be an issue for piles left exposed to the elements with shrink (loss due to wind) estimated to be as high as five per cent under some conditions.

The increase in the nitrogen and phosphorus level in the manure can be a negative or a real bonus if you have a large land base for annual crop production or pasture. A plus for producers managing intensive land bases is that feeding corn DDGS decreases manure production due to the improved digestibility of the diet and feed conversion when corn DDGS displaces some of the barley, and more so when it displaces some of the silage as well.

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AN ECONOMIC SCENARIO

Given the prices supplied by Campbell and using a University of Saskatchewan study conducted by Lee-Anne Walter and Dr. John McKinnon as a baseline for performance of cattle finished on a typical ration of corn DDGS at the 20 per cent inclusion rate, Barry Robinson looked at whether corn DDGS would have been a profitable choice in 2010 and the first five months of the current year.

The control diet for the baseline study was 86.6 per cent rolled barley with 7.7 per cent silage and 5.7 per cent supplement. The research diet was 66.4 per cent rolled barley with 20.3 per cent corn DDGS, 7.6 per cent silage and 5.7 per cent supplement.

The start weight was 825 pounds and the finished weight was 1,440 pounds. Dry-matter intake (DMI) for the control group was 22.9 pounds per day, while that for the corn DDGS group was 22.4 pounds. The difference in the feed-to-gain (F/G) ratio was highly significant with the study group gaining a pound for every 6.1 pounds of dry matter consumed, while the control group consumed 6.4 pounds of dry matter to put on a pound of gain. The difference in average daily gain (ADG) wasn t significant in this trial, with the control group gaining 3.56 pounds per day versus 3.65 pounds per day for the corn DDGS cattle.

Robinson used his computer modelling program to mimic the ADG, F/G and DMI for the control and corn DDGS groups in the trial. In addition to the monthly barley grain and corn DDGS prices, other input costs included yardage at 45 cents per day, miscellaneous costs of $10 per head, 65 per cent moisture silage at $55 per tonne, a barley rolling cost of $10 per tonne, supplement at $330 per tonne and interest at six per cent, with the cattle valued at market price.

Considering the improvement in ADG and feed conversion every month, feedlots that included corn DDGS at the 20 per cent inclusion rate would have come out ahead of those feeding a barley grain ration by at least $7.74 per head and as much as $26.45 per head, he explains.

Since the difference in the ADG between the control and study groups wasn t significant in the baseline study, the last column shows that there would have been a benefit based on the feed conversion advantage alone. To arrive at the feed conversion benefit, Robinson subtracted the ADG benefit of $8.63 per head, which was calculated on a cost per day of $2.88 per head and the cattle finishing three days sooner in this model.

Robinson concludes that, given the feed conversion benefit, a feedlot could pay up to 125 per cent of the price of rolled barley for high-quality corn DDGS to be fed at a 20 per cent inclusion rate in a barley-based finishing feedlot ration. Paying a little more could be economically viable if the improvement in ADG is taken into account.

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