A Solution to More Ethanol, Less Corn
More ethanol plants will be coming to Ohio and to other livestock regions around the U.S., livestock producers will have to deal with less corn will being available for feed while more ethanol byproducts will be available. As the supply of ethanol co-products increases, how will that affect the price of the co-products? John Lawrence, Iowa State University and director of the Iowa Beef Center, says, “There have been several examples of when co-product has been free for the hauling as new plants come on-line, dryers malfunction, or something is out of spec, but this is not a long run sustainable price. Economics suggests that as the supply of co-products out paces demand prices will be lower. What is the lower bound? It depends on alternative markets for the co-product. One alternative are other buyers including livestock production in other states and countries.” The storage and long distant movement, Lawrence says, suggests that plants will have to dry the product, which at current natural gas prices is costly. A second alternative Lawrence explains is the co-product’s value as fuel for the plant. There is some price at which the plant is better off to burn DGS than sell it at too low of a price. Burning is likely to require additional investment into equipment and take time for plants to make that decision and get it installed. In the long run, however, burning may set the lower price for DGS. A third alternative is use the DGS on the ground as fertilizer.