Profit Tip: Economics of Storing Distillers Grains

Darrell R. Mark, Former Extension Livestock Marketing Specialist
Galen E. Erickson, Extension Feedlot Management Specialist
Josie A. Waterbury, Graduate Research Assistant

In the last few years, the decrease in co-product price, particularly for wet distillers grains plus solubles (WDGS), during the late summer months has provided incentive for producers to purchase co-products and store it to feed at a later date. Although co-product prices in 2008 didn't drop as much as the historical seasonals would have suggested for the late summer, storage opportunities may still exist for cattle feeders and cow/calf operations. Previous research has identified a number of ways to store ethanol co-products. Most of these involve storage in "ag bags" or similar silage-type bags or in bunker silos constructed from cement or hay bales. In order to pack the co-product for storage in these structures, it is typically mixed with some type of inexpensive roughage (e.g., ground wheat straw). Recipes for mixing co-products for storage vary according to the type of co-product, the moisture content, and the type of storage. Details for physically mixing and storing co-products are available in the Storage of Wet Corn Co-Products Manual.

From an economic perspective, ethanol co-products are a viable substitute for corn as WDGS and modified wet distillers grains plus solubles (MWDGS) generally are priced less than corn (on a dry matter basis). This discount to corn price typically is greatest during the summer months when co-products are in ample supply. Further, the storage of ethanol co-products allows small operations to utilize appropriate quantities of the feedstuff relative to the size of the operation and also acts as a natural procurement and price hedge for any type of operation because it becomes an owned commodity.

Storage of co-products involves several costs that vary depending on the storage method used. In addition to the cost of purchasing the co-product itself, producers must also consider the costs of machinery and labor, storage structure costs, transportation, interest, shrink, and other factors when making decisions to store co-products. Producers must also evaluate which of the storage methods best fits their operation. In order for storage to generate a positive return, the benefits of storing the co-product (the cost savings) must exceed the actual costs of storage. Producers can use Co-Product STORE-Storage To Optimize Ration Expenses-to quantify the costs of co-product storage. This interactive spreadsheet allows producers to analyze and evaluate specific storage scenarios in response to changing market conditions using different storage methods. Co-Product STORE is organized into four steps (Parameter Assumptions, Feed Costs, Equipment and Structure Costs, and Other Costs) and includes a results summary which reports costs and tonnage values for the total storage mixture and co-product alone. Two storage examples (bunker and silo bag) are evaluated as examples to illustrate how the spreadsheet estimates storage costs.

Co-Product STORE is available to download free of charge on the UNL Beef Production website. Go to http://beef.unl.edu and click on the "byproduct feeds" tab. Also visit the UNL Beef Production website for video illustrating mixing and packing techniques for wet co-product storage techniques. For several presentations related to feeding stored ethanol co-products, go to Bioenergy, Renewable Alternatives, UNL web site.

[September 12th, 2008]

Dr. Darrell Mark, Former Assistant Professor of Agricultural Economics
Dep. of Agricultural Economics, University of Nebraska - Lincoln, Lincoln, NE