Debate Over Feed Costs, Availability Takes Center Stage
The debate over feed costs and availability took center stage last week at a hearing of the House Subcommittee on Livestock, Dairy and Poultry. Representatives of all three sectors discussed the challenges of high feed costs and their concerns about whether sufficient feed would be available for U.S. producers’ needs should a true short crop occur in the next few years.
September 23, 2011
The debate over feed costs and availability took center stage last week at a hearing of the House Subcommittee on Livestock, Dairy and Poultry. Representatives of all three sectors discussed the challenges of high feed costs and their concerns about whether sufficient feed would be available for U.S. producers’ needs should a true short crop occur in the next few years.
The CME Group points out in its Sept. 20 Daily Livestock Report that there’s “no doubt that the total supply of high-energy feed ingredients is declining” for livestock. CME says the amount of corn fed to animals in the U.S. in 2011-2012 is projected to be 124.466 million metric tons (mt), 20% less than in the peak year of 2004-2005. To that feed supply, CME Group says it must add the distillers dried grains with solubles (DDGS) produced in the ethanol-refining process since it comes from the corn that is used for ethanol. But DDGS fills different purposes for different species, it says.
DDGS contains 18-20% protein but the protein is of relatively low quality. That is, it contains relatively low concentrations of the essential amino acids that must be present in pig and poultry diets, since those species cannot effectively synthesize amino acids. On the other hand, the protein in DDGS is great for cattle, since the microbes in the cow’s rumen can make higher-quality protein from low-quality protein or even non-protein nitrogen. So, DDGS used in cattle diets is more of a protein supplement, while it fulfills primarily an energy role in other diets; since most of the corn kernel’s energy (i.e., starch) is removed in the ethanol-refining process, its usefulness is limited. Poultry diets can generally only contain 10-20% DDGS while swine diets can use, on average, 20-30% DDGS with some phases containing as high as 40%.
No one knows, though, exactly how much DDGS goes to which species so an accurate energy vs. protein accounting for DDGS is impossible. Here we are giving DDGS full credit as an energy source for livestock feeds. That is an overstatement to be sure but one that provides a conservative view of the decline in high-energy feed availability. Total corn plus DDGS availability for feed peaked in 2007-2008 at 176.267 million mt. The projected 2011-2012 figure of 166.804 million mts is down 7.4% from ’07-08.
Projected 2011-2012 feed availabilities of all other grains, except wheat, are significantly lower than in 2004-2005. Oats are down 30%, sorghum is 71% lower, and barley is 61% lower than that year. And all three are sharply lower than last year as well.
Wheat feed availability is projected to grow significantly (87%) this year and to be about one-third higher than in 2004-2005. The amount of wheat available for feed has historically been quite variable since it must be in abundant supply to be cheap enough to substitute for corn. Higher corn prices will obviously make this happen more often so this year’s trend toward higher wheat feeding will likely continue provided world wheat supplies remain strong.
U.S. livestock and poultry producers have, so far, handled lower feed availability by becoming more efficient. In fact, the outputs of all four major species have grown even while feed supplies have dwindled. Compared to 2005, U.S. output of beef, pork, chicken and turkey have grown by 6.6%, 8.5%, 4.4% and 2.5%, respectively. The questions are: “how long can these efficiency gains continue?” and “what happens when a truly short crop comes along?"
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