As fall approached, the prospects for a record large corn harvest solidified, resulting in lower corn and ethanol coproduct feed prices. As shown in Figure 1, the price for dried distillers grains plus solubles (DDGS) in South Dakota declined from $206.75/ton to $198.20/ton (as is basis, or moisture included) from August 2 to September 27. Wet distillers grain plus solubles (WDGS) prices dropped from $73.40/ton to $65.40/ton (as is basis). Modified distillers grains plus solubles (MDGS) decreased from $76.00/ton to $65.50/ton (as is basis) during this time period. The price ethanol plants bid for corn during those two months fell from $5.49/bu to $4.50/bu (as is basis). Both corn prices and distillers grain prices are well below year-ago levels as this year’s national average corn yield rebounded from 123.4 bu/acre last year to the upper 150’s this year.
As cattle feeders evaluate purchases of corn and ethanol coproduct feeds, it is necessary to compare prices on a dry matter (DM) basis because the moisture contents of the feeds vary by product. On average, DDGS is 90% DM while WDGS is 35% DM. MWDG generally has a DM content of 50%. Thus, the as is DDGS price of $198.20/ton translates to $220.22/ton on a DM basis. The $65.40/ton as is price for WDGS is $186.86/ton on a DM basis. MDGS has a DM price of $199.40/ton when the as is price is $65.50/ton. So, on a DM ton basis, WDGS is lowest in price and DDGS has the highest price. This is typical and reflects both the area’s production of distillers grains as well as the demand for the products. Ethanol plants in the western Corn Belt states typically don’t dry distillers grain to 10% moisture (DDGS) as much as they do in other parts of the country because nearby cattle feedyards can feed the wetter coproducts and it results in an energy savings from drying the feeds less. On the demand side, most MDGS and nearly all WDGS would be fed to cattle. While cattle feedyards also can feed DDGS, they have to compete with the pork and poultry industries, as well as the export market for DDGS. The feeding systems in pork and poultry buildings don’t handle the wet coproducts as well (flexible auger tubes) and optimum dietary inclusion levels are usually lower for hogs and poultry compared to cattle. International exports tend to favor DDGS over WDGS and MDGS because it results in transportation of less water.
Note only do cattle feeders compare the prices of the various coproducts to each other on a DM basis, but they also have to compare it to corn prices to create a minimum cost ration. One way to do that is to divide the DM prices above by the DM price of corn (in dollars per ton units). (Since corn is about 15% moisture, it is necessary to adjust corn to DM prices to compare equivalently to the DM coproduct prices.) Doing this results in the price ratios presented in Figure 2. The broken lines show the coproduct prices as a percentage of the corn price in 2013, while the solid lines show the five-year averages.