Des Moines Register
07-30-06
Ethanol could fuel cattle comeback
Cheap, high-protein co-product feeds Iowa beef
By JERRY PERKINS
REGISTER FARM EDITOR
Cattle feeder John Hall of Ankeny thinks Iowa's ethanol industry holds the key to
the future of the state's cattle industry.
After the starch is removed from the corn kernel and used for ethanol production,
a high-protein feed remains that can be cheaply fed to livestock.
"It's a cheap source of dietary protein," said Hall. "We know the cattle like it."
Now, with Iowa's ethanol production booming, cattle producers and others say
Iowa is poised to make a comeback as a major beef-producing state.
There's plenty of the high-protein cattle feed available, and some ethanol plants
even have had to give the stuff away from time to time, said John Lawrence,
director of the Iowa Beef Industry Center at Iowa State University.
However, demand is increasing for the high-protein co-product of ethanol. More
and more Iowa cattle producers have learned just how good it can be for their
cattle.
Iowa ranked first in the number of cattle marketed from 1968-1972, said
Lawrence, who also is an economist at Iowa State.
The state's fed-cattle market totals fell from about 4 million head per year 35
years ago to about 1.5 million last year, he said. Several factors - packing plants
moving to the Southwest, environmental concerns, and development of large
feedlots - led to the exodus.
There is precedent for a cattle comeback.
Iowa ranked No. 1 in egg production in 1958, lost the crown to Ohio, then
regained it several years ago when egg producers were attracted to Iowa's cheap
feed prices.
The production of cheap feed for cattle presents a similar opportunity for Iowa's
cattle industry, Lawrence said.
The question, according to Lawrence, is, ''How do we capture that opportunity?"
The number of Iowa cattle has fallen 10 percent in the last five years, according
to the U.S. Department of Agriculture. But the largest feedlots in Iowa are
growing the most and are most likely to use distillers dried grains, Lawrence said.
The high-protein feed that results from ethanol production goes by various
names, depending on the way the ethanol is produced.
Distillers dried grains are produced by dry mill ethanol plants - mostly the smaller
and newer ethanol plants going up in Iowa.
Corn gluten feed and meal come out of wet mill ethanol plants that are larger
and, usually, older plants.
No matter what the end products are called, however, Hall, Lawrence and others
think the availability of distillers dried grains and other ethanol extras will give
Iowa - the nation's top ethanol-producing state - a competitive advantage over
cattle-feeding states that don't make as much ethanol.
"As the ethanol industry grows here, it's real simple to see that we are going to
have a big advantage over the big Western feedlots," Hall said. "It's a great thing
for Iowa to bring some cattle back to this state. We've got young people wanting
to enter the cattle business for the long pull. This might be one of the best ways
to do it."
Hall has been feeding ethanol co-products to his cattle since 1985, when he
started buying wet corn gluten feed from Cargill Inc.'s corn syrup plant in Cedar
Rapids.
Instead of spending $50,000 on new silage equipment, Hall decided it would be
cheaper to substitute the wet corn gluten feed in his cattle rations.
Hall won't say how many cattle he feeds, but he said feeding high-protein ethanol
co-products to his cattle cuts the cost of a pound of grain by 5 cents.
"That adds up to $25 for each 500 pounds of grain," Hall said. "Sometimes, that's
your complete profit margin on a head of cattle."
Dan Loy, an Iowa State University Extension beef specialist, said feeding trials
have shown that distillers dried grains are nutritionally superior to corn because
removing the starch from the corn kernel concentrates the other nutrients.
As ethanol production in Iowa has expanded rapidly, so has the production of
distillers dried grains.
There are about 4 million tons of distillers dried grains being produced a year in
Iowa, said Shannon Textor, director of market development for the Iowa Corn
Promotion Board.
That is expected to grow to more than 8 million tons a year as the state's ethanol
industry expands, Textor said.
Finding a market for all that potential livestock feed is essential if Iowa's ethanol
industry is to become as profitable as possible. But Iowa ethanol plants aren't
having a problem selling their distillers dried grains.
Jason Sagebiel, a risk management consultant for FCStone's Renewable Fuels
Group, said Iowa ethanol plants are finding markets for all their distillers dried
grains and other high-protein ethanol end products.
"Prices are a little bit weaker than they were last fall," Sagebiel said. "There's
more co-product out there because ethanol production is increasing and we still
have a pretty good supply of corn."
Sales of distillers dried grains typically make up about 17 percent to 20 percent of
an ethanol plant's revenues, Sagebiel said. But that percentage is closer to 12
percent now because of record-high ethanol prices.
Lawrence of the Iowa Beef Center said that there have been rare instances when
some ethanol plants have had to give away their distillers dried grains.
"From time to time, there's a glitch in the system and you can get it for free,"
Lawrence said.
Mike Jerke, manager of the Quad County Corn Processors in Galva, said
livestock numbers have increased near the ethanol plant, primarily because of
the 90,000 tons of distillers dried grains produced there annually.
"It's not a stretch to say livestock numbers have doubled from where they were in
2002 when we started production," Jerke said.
Allen Trenkle, distinguished agriculture professor in the animal science
department at Iowa State University, said he has been evaluating ethanol coproducts as cattle feed for more than 20 years.
"It's an excellent feed and an excellent opportunity for the cattle and ethanol
industries," said Trenkle, who specializes in beef cattle. "What I'm trying to
address is, if the price of corn goes up because of increased ethanol production,
is there an alternative?"
Trenkle is feeding higher and higher percentages of distillers dried grains to
cattle in his experiments at Iowa State research farms.
"In my mind, we ought to be feeding as much of this as we can," he said.