Future Beef Production A Model for Iowa Allen Trenkle Thoughts With every problem there is opportunity Be prepared to take advantage of opportunities Understand the science Develop a vision for the beef industry Prepare yourself to make a contribution Learn to implement information driven systems Develop interpersonal skills "The hardest thing to learn in life is which bridge to cross and which to burn." (David Russell) Structure of the Beef Industry 1. The beef industry continues to place value on tradition 2. Remains highly segmented Seed stock – Cow/calf – Backgrounders – Feedlot – Packers – Retail All need to be focused on satisfying the end user: Consumers 3. Slow to change Poultry and Swine industries vertically Will not be extensive total integration of beef production Need more coordination of segments of beef industry Will require individuals with unique talents: Understanding of the science, vision, people skills, communication skills, entrepreneurial attitude, understand how to use information Issues Facing the Beef Industry Opportunities for Iowa? Feed prices and availability Corn: Ethanol – Export sales Forage: Competition from dairies in sections of country Land: Cost – Increased corn acres Availability for grazing cattle Export markets for beef Markets opening up again Identified cattle have value Environmental issues EPA – Air Quality (dust), Clean water Resources: Production vs. Recreation National animal identification Federal requirement – voluntary Needed to grow export markets Private companies developing Beef quality and safety National Beef Quality Audit indicates progress but slow Instrument grading of carcasses How to implement and accept? Concentration in packing industry Relationship with packers to develop production contracts Animal welfare Role of animals in society Human resources Immigration issues – Illegal workers Packing plants & Feedyards Training and retention of employees Diversity of cultures - Community Changes Occurring in Beef Industry Increasing beef demand Up over 20% since 1998 Though current trend is no change or some decline Increased national emphasis on quality grades Spread between Choice-Select trending to increase Movement from commodity to specified products (Still mostly commodity) There are 45 USDA Certified Beef Programs (Branded Programs) Increasing consumer demand for “Natural” beef products Predictability, traceability, integrity Instrument grading of beef carcasses Should result in better identification of value and payment for value Increase in marketing of table ready precooked beef products Increasing cost of energy (Likely to have the greatest effects) Greater cost of producing beef Feed Transportation Processing Location and structure of the industry might change 2005 National Beef Quality Audit Conducted every five years (Past audits 1991, 1995, 2000) Improvements during previous 5 years Improved microbiological safety Improved cattle genetics of higher quality Fewer injection-site lesions Still needing improvement Lack of uniformity/consistency in quality Marbling, Tenderness, Palatability, Inconsistency among & within grades Beef cuts too large What could cattlemen do? Source and age verification (ID system) “INFORMATION” Increase marbling (Management and genetics) Where will there be future market growth? High quality beef Consumer demand for “Natural” beef products International markets What Is Important to End Users of Beef? Retailers and Consumers Expectations 1. Value received for investment Tenderness, Taste, Safety, Nutrition As economy slows – fewer dollars for high-priced meat and less eating in high-end restaurants 2. Assurance of proper management and handling of animals 3. Environment protected 4. Trend towards consumer support for local production Production response 1. Produce safe quality product 2. Implement animal ID and information systems with integrity 3. Smaller production units? 4. New packing industry? Beef Production in Iowa Beef cows: 3.2% of U.S. population Fed cattle marketed: 6.2% of U.S. population (18% 1968-72) About 50% fed cattle produced in feedlots greater than 1000 head All cattle feeders in Iowa are farmer-feeders All grow corn and soybeans Some feed cattle commercially Number of small (< 250 head) lots decreasing Limited packing plant capacity Excess capacity nationally Historically Iowa has had lower feed costs Greater access to co-products from production of biofuels Iowa vs. Texas Iowa Texas (High Plains) Advantages 1. Natural resources Highly productive soils Water (rainfall) 2. Lower cost feed supply Access to biofuels byproducts 3. High quality cattle Advantages 1. Established large feedlots Customer base 2. Established packing industry 3. Infrastructure for support Capital investment Land Organizations as advocates 4. Environment: +/- Limitations 1. No new packers in Iowa 2. Environmental regulations 3. People attitudes Accept animal production Develop new systems Financial investment Limitations 1. Limiting water supply 2. Higher feed costs Transporting byproduct feeds Growth of Ethanol Industry in Iowa 2500 Currently: 28 plants 2.1 bill. Gallons (760 mill. bu.) 1500 New or Expansions: 16 plants 1.5 bill. Gallons (536 mill. bu.) 1000 500 0 78 80 82 84 86 88 90 92 94 96 98 0 2 4 6 8 800 Year 1.3 bil bu 65% of IA 2 bil bu crop 10.4 mil tons dry DGS Historically IA corn: 650 mil bu exported 400 mil bu wet milled 20 mil bu milled 200 mil bu ethanol Feed 60% of crop 700 Million bushels Million gallons 2000 600 500 400 300 200 100 0 78 80 82 84 86 88 90 92 94 96 98 Year 0 2 4 6 8 Ethanol Plants Feedstock Corn grain 0.0568 gal ethanol/lb of DM Biomass 0.0420 gal ethanol/lb of DM 100 MGY plant Corn grain 35.7 million bu corn (1.0 million ton) 317 thousand ton DGS (90% DM) 895 thousand ton DGS (32% DM) 472,000 cattle (30% DGS) Possible Consequences of Biofuels 1. Livestock industries remain a competitor for feedstocks • DGS remain a commodity • Exacerbate the problems of agriculture October 12, 2007 – A broad coalition of organizations representing animal agriculture urge congressional leaders to oppose increasing RFS for grain-based ethanol January 8, 2008 – Beef “Should we just accept and adapt to ethanol?” (Article did not mention any opportunities.) 2. Livestock industries see opportunities to coordinate with production of biofuels and proactively address some of the issues being raised • Food and fuel • Net energy balance of producing biofuels • Sustainability of biofuels production Economic Ecologic • Rural economic development Economic Benefits of an Ethanol Plant 50 MGY Plant in Iowa (2005) Direct Indirect Induced Total Output, $ 118,648,636 13,301,156 1,546,605 133,496,397 Value added, $ 18,405,433 6,011,897 942,326 25,359,656 35 75 23 133 Jobs Swenson and Eathington, 2006 Economic Impact of 5,000-head Cattle Feedlot Category Sales ($) No. Jobs Income ($) 11,793,630 10 431,103 Construction 38,693 0.4 16,076 Transportation/warehousing 362,705 2.5 105,331 Utilities 106,278 0.3 22,742 Manufacturing 308,735 0.8 49,266 Retail trade 19,039 0.4 8,855 Finance/insurance/real estate services 272,384 1.5 62,400 Professional services 207,510 2.4 76,562 Information services 36,043 0.2 9,055 Other services 108,638 1.7 37,917 Government activities 37,300 0.1 8,206 13,290,956 20.4 827,513 Agriculture Total John Lawrence, 2006 Feedlot Activity Associated with a 50 MGY Ethanol Plant 50 MGY @ 2.8 gal/bu = 17.86 million bu corn @ 16 lbs DGS/bu = 285.7 million lbs DGS dry matter Cattle in feedlot 600 to 1250 lbs @ feed conversion of 6.1 & 60% of feed intake as DGS = 2,380 lbs DGS/animal = 120,000 animals = 24 5,000-head feedlots (490 jobs vs. 133 with ethanol plant) Co-product Feeds Currently Available Dry Grind Plants 1 bushel corn 2.8 gal ethanol 16 to 17 lbs DGS (DM) Distillers grains - DG Wet – 30 to 35% DM Dry – 90 to 92% DM Condensed distillers solubles - CDS Wet – 30 to 32% DM (variable) Dry – 90 to 92% DM (not readily available) Distillers grains with solubles – DGS Wet – 30 to 50% DM Dry – 90 to 92% DM Composition of Co-products (% DM) Co-products from corn are nearly complete feeds Crude protein Oil NDF ADF Starch Ca P K S DG 30 10 30 10 1.3 0.06 0.85 1.0 0.4-1.0 DGS = about 65% DG + 35% CDS CDS 18.5 15 4.5 2.0 3.8 0.07 1.5 2.2 1.4 Corn 8.5 4 10 2.5 69 0.02 0.32 0.44 0.12 Effects of Feeding Wet Distillers Grains on Carcass Measurements – Steers and Heifers Control Medium High End live wt, lbs 1294 1306 1290 Daily gain, lbs 3.28 3.46 3.31 Carcass wt, lbs 792 806 788 Dressing % 61.1 61.9 61.4 REA, sq in 14.0 14.3 14.0 Backfat, in 0.42 0.44 0.40 KHP, % 2.21 2.34 2.20 Call YG 2.20 2.28 2.12 Calculated YG 2.52 2.58 2.45 AOV: ADG P < 0.04, Dress % P < 0.05 Bonferroni t-test: No significance Medium: 20 to 28% DGS High: 40% DGS Effects of Feeding Wet Distillers Grains on Marbling Score and Percent Choice – Steers and Heifers Marbling score % Choice 60 500 40 400 30 20 350 10 300 0 Control Medium High % USDA Choice Marbling score 50 450 Analysis of Variance P < 0.05 Marbling Control vs. Medium Control vs. High * Medium vs. High * % Choice Control vs. Medium Control vs. High * Medium vs. High * Linear Regression Marbling score P < 0.075 % Choice P < 0.01 Wet DGS 62 pens of yearling cattle fed 112 to 186 days Fed control (0), medium (20 or 28), and high (40%) wet DGS Sensory Evaluation of Steaks from the Strip Loins of Steers Fed Wet Distillers Grains – Beef Steers Tenderness Juiciness Flavor intensity Overall Sensory Panel Score 6.5 6.25 6 5.75 5.5 5.25 5 0 20 % Wet DGS 40 Analysis of Variance P < 0.05 Tenderness 0 vs. 20 0 vs. 40 20 vs. 40 * Juiciness 0 vs. 20 0 vs. 40 20 vs. 40 Flavor 0 vs. 20 0 vs. 40 20 vs. 40 Overall 0 vs. 20 0 vs. 40 20 vs. 40 Carcass Value in a Grid Market Effects of Feeding Wet DGS Control 1150 Medium No Significance High No Significance Value, $/head 1125 1100 1075 1050 1025 Steers and Heifers Steers Grid: $140/Cwt Choice YG 3 Quality: Prime +$29, CAB +$7, Select -$9, NR -$12 Yield grade: YG 1 +$6.5, YG 2 +$2.5, YG 4 -1$5 Weight: 951-1050 lbs -$18, >1050 -$35, 526-550 -$18, <525 -$30 Ethanol Production in Iowa Dry-Grind Plants Are solutions or problems being created? Current New Production Expand Total Number of plants 28 16 44 Ethanol, bil gal/yr 2.1 1.5 3.6 Corn used, mil bu/yr 750 545 1,295 DGS produced, mil ton DM/yr 6.00 4.36 10.36 Cattle inventory neededa 2.74 1.99 4.73 aCould be feedlot (backgrounding, finish), beef cows, dairy cows, replacement females. Based on feeding 40 lbs wet DGS/d. Cattle Can be Fed Differently Value of Wet Corn Gluten Feed when Replacing Corn, Protein Supplement and Roughage % CGF 0 30 50 70 % Ground cobs 23.4 13.4 6.8 0 Gain, lbs/d 2.86 3.36* 3.33* 3.13 Feed DM, lbs/lbs 20.4 21.5* 20.9 19.4* Feed/gain 7.15 6.40* 6.21* 6.20* Carcass, lbs 704 768* 758* 745* Dressing % 60.9 61.8* 61.5 62.0* Quality grade 6.67 6.30 6.00 6.33 740 lb yearling steers fed 148 days *P < 0.05 Effects of Feeding Wet Corn Gluten Feed on Carcass Measurements – Beef Steers Control Low Medium High End live wt, lbs 1254 1271 1268 1249 Daily gain, lbs 3.18 3.25 3.24 3.12 Carcass wt, lbs 755 785 775 756 Dressing % 60.1 61.6* 61.0 60.4 REA, sq in 12.8 12.8 12.8 12.7 Backfat, in 0.44 0.50 0.48 0.46 KHP, % 2.06 2.16 2.05 1.94 Call YG 2.58 2.78 2.64 2.55 Calculated YG 2.78 3.08 2.95 2.85 *Dressing %: Low vs. Control P < 0.05 Effects of Feeding Wet Corn Gluten Feed on Marbling Score and Percent Choice – Beef Steers % Choice 600 100 500 80 400 60 300 40 200 % USDA Choice Marbling score Marbling score Analysis of Variance No significance Regression analysis Linear - Quadratic No significance 20 100 0 0 Control Low Medium High Wet CGF 36 pens of yearling cattle fed 108 to 215 days Fed control (0), low 30 or 40), medium (50 or 65), and high (90%) wet CGF Sensory Evaluation of Steaks from the Strip Loins of Steers Fed Wet Corn Gluten Feed – Beef Steers Sensory Panel Score Tenderness Juiciness Flavor Overall WB shear 7 6.8 6.6 6.4 6.2 6 5.8 5.6 5.4 5.2 5 Analysis of variance No significance 0 30 50 % Wet CGF 90 Effects of Feeding Wet DGS on Carcass Measurements Steers and Heifers – Two Experiments (96 head fed each diet) Wet DGS, % diet DM 0 20 40 60 End live wt, lbs 1238 1249 1230 1251 Daily gain, lbs 3.63 3.73 3.56 3.08 Feed/d, lbs 22.1 22.6 21.4 19.9 Feed/gain 6.19 6.15 6.07 6.48 Carcass wt, lbs 749 762 754 757 REA, sq in 12.7 12.8 12.8 13.0 Backfat, in 0.43 0.46 0.46 0.49 Marbling score 522 526 515 506 Call YG 2.18 2.25 2.31 2.49 Value, $/hd 1163.52 1182.85 1164.84 1141.36 0.55 FEED COST OF GAIN A. Steers - DGS 1 X price of corn Control 20% DGS 40% DGS 60% DGS 0.45 Steers Fed Modified DGS 0.40 0.50 C. Steers - DGS 0.70 X price of corn 0.35 0.45 Control 20% DGS 40% DGS 60% DGS 0.30 0.25 0.20 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Corn, $/bu Feed cost, $/lb gain Feed cost, $/lb gain 0.50 0.40 0.35 0.30 0.25 0.50 B. Steers - DGS 0.85 X price of corn 0.20 Feed cost, $/lb gain 0.45 Control 20% DGS 40% DGS 60% DGS 0.40 0.15 1.5 2.0 2.5 3.0 3.5 4.0 Corn, $/bu 0.35 Feed cost of gain of 830 lb steers fed a corn-based diet of modified DGS (52% DM). 0.30 0.25 0.20 1.5 2.0 2.5 3.0 Corn, $/bu 3.5 4.0 4.5 Feed cost related to price of corn and DGS (as % of corn price). 4.5 0.60 FEED COST OF GAIN A. Heifers - DGS 1 X price of corn Heifers Fed Modified DGS Control 20% DGS 40% DGS 60% DGS 0.50 0.45 0.50 0.40 C. Heifers - DGS 0.70 X price of corn 0.35 0.45 0.30 0.25 0.20 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Corn, $/bu 0.55 B. Heifers - DGS 0.85 X price of corn Feed cost, $/lb gain Control 20% DGS 40% DGS 60% DGS 0.40 0.35 0.30 0.25 0.50 Control 20% DGS 40% DGS 60% DGS 0.45 Feed cost, $/lb gain Feed cost, $/lb gain 0.55 0.20 1.5 2.0 2.5 3.0 3.5 4.0 Corn, $/bu 0.40 Feed cost of gain of 730 lb heifers fed a corn-based diet of modified DGS (52% DM). 0.35 0.30 0.25 0.20 1.5 2.0 2.5 3.0 Corn, $/bu 3.5 4.0 4.5 Feed cost related to price of corn and DGS (as % of corn price). 4.5 0.60 Control 20% DGS 40% DGS 60% DGS 0.50 0.45 Steers Fed Wet DGS 0.40 0.6 C. Steers - DGS 0.70 X price of corn 0.35 0.25 0.20 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Corn, $/bu 0.60 B. Steers - DGS 0.85 X price of corn 0.55 Feed cost, $/lb gain .7X vs Col 24 .7X vs Col 25 .7X vs Col 26 .7X vs Col 27 0.5 0.30 0.45 0.4 0.3 0.2 Control 20% DGS 40% DGS 60% DGS 0.50 Feed cost, $/lb gain Feed cost, $/lb gain FEED COST OF GAIN A. Steers - DGS 1 X price of corn 0.55 0.1 1.5 2.0 2.5 3.0 3.5 4.0 Corn, $/bu 0.40 Feed cost of gain of 810 lb steers fed a corn-based diet of wet DGS (32% DM). 0.35 0.30 0.25 0.20 1.5 2.0 2.5 3.0 Corn, $/bu 3.5 4.0 4.5 Feed cost related to price of corn and DGS (as % of corn price). 4.5 0.60 FEED COST OF GAIN A. Heifers - DGS 1 X price of corn Heifers Fed Wet DGS Control 20% DGS 40% DGS 60% DGS 0.50 0.45 0.60 0.40 0.55 0.35 0.30 0.25 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Corn, $/bu Feed cost, $/lb gain Feed cost, $/lb gain 0.55 C. Heifers - DGS 0.70 X price of corn Control 20% DGS 40% DGS 60% DGS 0.50 0.45 0.40 0.35 0.30 0.60 B. Heifers - DGS 0.85 X price of corn 0.25 Feed cost, $/lb gain 0.55 Control 20% DGS 40% DGS 60% DGS 0.50 0.45 0.20 1.5 2.0 2.5 3.0 3.5 4.0 Corn, $/bu Feed cost of gain of 710 lb heifers fed a corn-based diet of wet DGS (32% DM). 0.40 0.35 0.30 Feed cost related to price of corn and DGS (as % of corn price). 0.25 0.20 1.5 2.0 2.5 3.0 Corn, $/bu 3.5 4.0 4.5 4.5 Future of Beef Industry Rather than asking: “Should we just accept and adapt to Ethanol? (Beef magazine, Jan 15, 2008) Should be asking: “Where are the opportunities?” Agriculture and the beef industry are currently undergoing more change than any previous time. Probably not obvious. Why can’t we take advantage of this opportunity? It’s Energy, Stupid Agriculture Energy Balance in a Monoculture Solar Fossil energy Fuel Gas Fertilizer Crops Grain Grain products Heat • Low ecological sustainability • Low energetic sustainability All non-solar energy is imported • System was economically sustainable when cost of fossil energy was low Exported Agriculture Energy Balance in a Nutrient Recycling System Solar Fossil energy Fuel Gas Manure as fertilizer Crops Grain Grain products Heat Livestock • System requires less input of fossil energy • System is more ecologically sustainable - Export primarily carbon - Recycle N-P-K • System is more energetically sustainable Exported Ethanol Livestock Prod Integrating Cattle and Ethanol Improves Net Energy (Biofuel energy/Petroleum energy) Net energy, Output/Input 2.5 Benefits 1. Reduced use of commercial nitrogen fertilizer 2. Greater value of DGS 3. Reduced use of natural gas 2 1.5 1 – Dependent on feeding high levels of wet DGS to cattle – Need to feed all DGS locally 0.5 0 Ethanol Ethanol Ethanol + Cattle + Cattle + Digester Future Model Integrated Livestock and Ethanol Production Benefits of Manure as Fertilizer • Stop importing P & K Corn Ethanol Fuel Oil • Reduce N imported DGS CO2 Algae Feed Benefits of anaerobic digester • Reduce use of natural gas Feedlot Food • Conserve manure nutrients CH4 Identified markets Limitations Fertilizer • Majority of feedlots not Manure designed for this system • Requires extensive Anaerobic coordination Digester • Anaerobic digesters not well developed Energy Information Administration: Ethanol production increase to 14.6 billion gallons by 2030 93% ethanol from corn grain Crude oil: $95/barrel Natural gas: $9.60/103 cubic feet