Agricultural Economics Department


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Published in Cornhusker Economics, 3-26-08. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska – Lincoln.


Ethanol production has been increasing exponentially in recent years. Production in 2007 was at approximately 7.5 billion gallons, and is projected to grow to over 11 billion gallons within the next couple of years (Renewable Fuels Association). Not only is this growing industry producing increasing amounts of ethanol fuel, but the quantity of ethanol byproducts is rapidly increasing as well. The Renewable Fuels Association estimates that more than 14.6 million metric tons of distillers grains were produced in 2007. As a byproduct of dry mill ethanol production, both dry distillers grains plus solubes (DDGS) and wet distillers grains plus solubes (WDGS) are good protein and energy sources and are commonly used in livestock rations, particularly cattle. Research has shown that feed conversion, average daily gain, and final body weight all improve for feedlot cattle consuming byproducts, as compared to cattle fed a conventional diet containing no byproducts (Buckner et al., 2007). As both the supply of distillers grains and the demand for them as a livestock feed increased in recent years, the market for these ethanol byproducts has clearly emerged (and may be maturing), requiring both sellers and buyers to understand historical and seasonal trends, pricing basis for various types of byproducts, and contracting opportunities and risk management strategies.