U.S. Market Potential For Dried Distillers Grain With Solubles

Prior research presumes that the U.S. livestock feed demand for dried distillers grains with solubles (DDGS) can accommodate the rapid growth in DDGS production. The objective of this work is to reexamine the market potential for DDGS by considering factors that limit the adoption rate of DDGS. An estimate of DDGS market size requires information about DDGS inclusion rates, animal populations, and adoption rates. The rapid expansion of the ethanol industry will saturate the dairy and hog markets for DDGS by the end of 2009, while the beef and poultry use must triple to consume all available product. One must be circumspect of these forecasts for three reasons. First, the supply of DDGS is contingent on ethanol production. If the downturn in ethanol profitability spreads, less DDGS may be available to absorb. Second, in the short run, farms capable of consuming DDGS are not likely to shift, and thus animal populations are relatively fixed. However, the DDGS inclusion rates will most likely increase from current practices. Yet it is hard to imagine the market penetration rate will reach 100 percent for any class of livestock. Finally, export markets may also consume more DDGS than expected, reducing the pressure to expand US consumption. Thus, producers and consumer of DDGS would be well advised to pay careful attention to market developments as the US DDGS continues to grow.