(DTN) Every time talk turns to the use of distillers grains as an animal feed, the subject of replacing corn and/or soybean meal in the ration invariably arises. The concern usually revolves around the fear that corn and, to some extent, soybean meal will be completely replaced by distillers grains. But the reality is that nothing could be farther from the truth.

Several prominent agricultural economists at a recent distillers grain symposium indicated that, yes, feeders will increase the amount of distillers grains used in the coming years and decrease the amount of corn they feed their animals. Yet, at the same time, feeders will continue to use roughly five times more corn than distillers grains while all the dried distillers grains made from the ethanol fuel distillation process will be consumed by animals in the U.S. and elsewhere. Between 25 percent and 30 percent of U.S. distillers grains are forecast to be exported and the rest consumed domestically by beef and dairy cattle with swine and poultry consuming lesser amounts.

This likely means that, due to population growth, forecasts are calling for more animal units on feed, and probably more development in using distillers grains in rations of other animals, as well as for non-feed uses.

Most of us know that distillers grains are a co-product of drymill ethanol production, but what most don't know is that it comes from a process that only uses the starch portion of the corn kernel, which is about 70 percent of the total. All the remaining nutrients -- protein, fat, minerals and vitamins -- are packed into distillers grains that are used as a feed for livestock. A bushel of corn weighs 56 pounds and can produce about 2.8 gallons of ethanol and 17 pounds of distillers grains.

Distillers grains can be fed to livestock wet or dry. Dried distillers grain is the most common, as it has a longer shelf life and can be transported over long distances. If there is a consistent nearby market, ethanol producers can supply the feed as wet distillers grain. The wet product is not as easily transportable, but it is cheaper, as the cost of drying is removed.

Dried distillers grains with solubles (DDGS) is the form that is widely available to the feed industry. The liquid that is separated from the mash during the distilling process is partially dehydrated into a syrup and then added back onto the dried distillers grains to create DDGS.

DDGS is a high-quality feedstuff for livestock, poultry and aquaculture. The feed is an economical partial replacement, and I emphasize partial, for corn, soybean meal and dicalcium phosphate in livestock and poultry feeds. Historically, over 85 percent of DDGS has been fed to cattle, as it is an excellent economical feed ingredient for ruminant diets.

How much distillers grains can be safely used in a feed ration is where confusion comes in. Distillers grains are not a 100-percent replacement for corn and soybean meal in the ration. The biggest reason it is not a replacement, I think, is because of the sulfur content in distillers grains. Sulfuric acid is used to break down the starch in the ethanol distillation process and, as a result, sulfur winds up in distillers grains. Too much sulfur is toxic to animals.

There have been several studies by the industry and universities concerning the use of distillers grains, and for the livestock and poultry industry, recommendations vary by species. For beef cattle, recommended inclusion rates for dried (10 percent moisture) and wet (65 percent moisture) distillers grains co-products are 20 percent and 40 percent, respectively. In dairy cattle rations, inclusion rates of dried and wet distillers grains co-products of 10 percent to 15 percent are recommended. In swine feed rations, inclusion rates of 10 percent are recommended. In poultry feed, rations of 10 percent inclusion rate have been suggested.

For those interested in how much corn is being displaced by distillers grains, there are some preliminary numbers for the 2009-10 marketing year in a study by Iowa State University that indicate the equivalent of 811 million bushels of corn will be replaced in the feed sector. That is about 15 percent of 5.375 billion bushels of corn estimated for feed use. One has to remember that corn used for ethanol production was raised 19.6 percent for this marketing year, which more than offsets the loss in feed use.

Another displacement by distillers grains comes in soybean meal. Preliminary numbers in this category show that use of 3.9 million short tons of soybean meal is being lost to distillers grains in domestic use. That is 13 percent of the 30 million short tons of soybean meal estimated for domestic use.

Livestock producers typically buy feed inputs that will provide them with

the most net revenue over feed costs. For an individual feedstuff such as distillers grains, a livestock feeder will use the product up to the point where the value of additional income gained equals the cost of the product used in the feed ration. It is really a balancing act, as there is more to it than just product cost; there is also the nutritional aspect of the feed ration.

The average price for corn across the country is running at $3.25 per bushel, or 5.8 cents per pound, and the average price for dried distillers grains is around $115 per ton or 5.75 cents per pound. The spread between corn and distillers grains are practically even today, but a week ago, the spread was slightly more than 1/4 cent per pound. Corn has come under pressure from outside markets and a stronger dollar in the past week. While distillers grains track the corn market, there is usually a delay in reaction from byproducts. The point here is that even if prices are about the same, there is still value in using distillers grains over whole corn due to the gain in protein as well as other nutrients.

As far as the corn market is concerned, basis values will likely remain firm for corn in the months and years to come due to increasing demand for ethanol while the price of distillers grains will track at or below the price of corn in order to ensure that demand will be stable. The establishment of the new DDGs futures contract should help feeders hedge costs, but until interest in trading this futures market can be generated, it may be some time before it is available.

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