The Latest on Production, Domestic Usage, and Exports of Distillers Dried Grains and Solubles

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S. Patricia Batres-Marquez
Decision Innovation Solutions (08/24/2016)
11107 Aurora Avenue
Urbandale, IA 50322

Decision Innovation SolutionsDistillers dried grains with solubles (DDGS) is the main co-product of corn ethanol produced in dry-mill plants. Since 2007, on average, 97.1% of total DDGS production has come from dry-mill ethanol facilities with the remaining 2.9% coming from beverage distilleries (USDA-ERS, 2016a). Production and sales of DDGS make an important contribution to the total revenue of dry-mill ethanol plants, particularly during tight-margin situations. Monthly data from the Ethanol Profitability Model developed by Hofstrand (2016) indicate that for a typical dry-mill Iowa ethanol plant, both ethanol and DDGS revenues have declined since January 2012 (Figure 1), but on average from January 2012 to May 2016, 22% (± 3.0%) of the total revenue generated (from ethanol and DDGS sales) was contributed by DDGS sales.

Monthly Revenue of Ethanol Production Figure 1. Monthly Revenue of Ethanol Production at a Typical Iowa Corn Dry-Mill Ethanol Plant

Distillers Dried Grains with Solubles Production

Corn ethanol is produced in either dry-mill plants or wet-mill plants but the majority of the production comes from dry-mill plants as most of the growth in the ethanol industry has occurred with the expansion of dry-mill plants. This is mainly because dry mills are less expensive to build compared with wet mills. In 2001/02 wet-mill plants produced 69% of the total ethanol production, whereas dry-mill plants produced the remaining 31% (Hoffman and Baker, 2011). In contrast, corn consumed in dry-mill fuel production represented 89.3% of total corn use for ethanol during the first ten months (Sep 2015 to June 2016) of the 2015/16 marketing year, while the rest (10.7%) was processed in wet mills for fuel production (USDA-NASS).

For each bushel of corn (56 pounds) used to produce ethanol, about 17 pounds of distillers grains are manufactured, so the expansion of dry-mill corn-base ethanol production has brought a substantial increase in the supply of DDGS. As Figure 2 shows, 19.8 million metric tons (MMT) of DDGS were produced in dry-mill ethanol plants in 2007/08 compared with 36.1 MMT in 2014/15. USDA’s latest estimate for 2015/16 DDGS production is 36.3 MMT (USDA-ERS, 2016a); however, this estimate was based on the April 12, 2016, World Agricultural Supply and Demand Estimates (WASDE) report by USDA and USDA’s Feed Grains Database. At that time, the amount of corn use for ethanol and co-products at dry and wet mill plants for 2015/16 was estimated at 5.250 billion bushels. Since then, that estimate has been reduced to 5.200 billion bushels on account of a decline of 50 million bushels of corn used for ethanol production at both dry and wet mill plants. This decline is reflected in the July and August 2016 data from the Grain Crushings and Co-Products Production reports published by USDA-NASS.

Using this latest estimate of corn usage for ethanol, assuming that 89.3% of corn used for ethanol and co-products production is consumed in dry-mill plants and that 17 pounds of DDGS are produced per bushel of corn used in the production of ethanol, there would be a 44.65 million bushels (50*89.3%) corn reduction for dry mill plants in 2015/16; this would translate into about 0.34 fewer MMT of DDGS produced in 2015/16 from the 36.3 MMT estimate. According to USDA’s projections (USDA-WAOB, 2016), 2016/17 corn usage for ethanol production and co-products will reach a volume of 5.275 billion bushels. This would convert into an estimated DDGS production of 36.3 MMT (40.05 million short tons). USDA increased corn usage for ethanol in the 2016/17 projection compared with 2015/16 because of a reduction of sorghum used for ethanol and higher expected ethanol blending in the new marketing year.

U.S. Ethanol and DDGS ProductionFigure 2. U.S. Ethanol and DDGS Production

Distillers Dried Grains with Solubles Usage

DDGS Domestic Useage

DDGS is an important component in the diet of livestock and poultry, and as such, DDGS partially substitutes for corn (energy) and soybean meal (protein) in the diet of these animals. Ruminant animals, whose digestive systems are well suited for DDGS ingestion, consume the largest amount of the domestic DDGS. Hogs and poultry, because of their monogastric digest systems, are less suited for high intakes of DDGS. According to Decision Innovation Solutions estimates, inclusion rates in feed rations can be as high as 40% for beef cattle and 20% for dairy cattle. For finishing hogs, the maximum DDGS inclusion rates can be as high as 20%, whereas for poultry, the rates are estimated at 10%.

Table 1 indicates that most of the DDGS produced is consumed domestically, but this share has been declining while DDGS exports have been increasing. In 2011/12 domestic DDGS use (as feed and residual) represented about 79.3% of total DDGS supply, whereas in 2014/15, this percentage declined to 69.3%. Table 1 also shows that of the total domestic DDGS use, about 54% of it goes into beef cattle, 34% to dairy cattle, 7% to hogs, and 5% to poultry consumption.

U.S. DDGS Supply and UsageUSDA’s first projection for 2016/17 corn use for feed and residual (WASDE, May 2016) indicated an increase of 300 million bushels to 5.550 billion bushels year over year. This projection was based on expected higher corn production, up 829 million to 14.430 billion bushels from the previous year; lower expected corn prices—$0.25 cheaper per bushel at $3.35 per bushel compared with the estimated 2015/16 corn price at $3.60 per bushel, and continued expansion of animal numbers in 2016/17. The expected further increase in animal numbers in 2016/17 would indicate good news for the domestic DDGS market. The latest WASDE report (August 2016) showed a larger 2016/17 corn production, to 15.2 billion bushels based on expected yields, up to 175.1 bushel per acre compared with 168.0, the projection from the previous month. The yield was adjusted based on the first survey-based corn yield forecast of the season. With the larger volume of corn production expected in 2016/17, the projection for corn use for feed and residual in the new year was increased to 5.675 billion bushels and the corn price was projected at the mid-range of $3.15 per bushel, down $0.20 from the May forecast, a low price not seen since 2006/07 ($3.04 per bushel).

Figure 3 shows the weekly average price of DDGS ($ per ton, Decatur, Illinois) and average weekly price of corn ($ per ton, Illinois). The data indicates that the price of DDGS is closely related with the price of corn. The correlation estimate indicates that from January 2007 to August 2016, there is an 82% positive correlation between corn prices and DDGS prices. The coefficients of a simple linear regression in which DDGS prices were modeled as dependent on corn prices indicate that from January 2007 to August 2016, for every dollar per ton increase in corn price the DDGS price increased by $0.79 per ton. The model indicates that about 67% of the variation in the price of DDGS can be explained by the variations in the price of corn. In addition to the price of corn, other factors, such as the price of soybean meal, also affect the price of DDGS.

With more corn projected to be going into feed and residual use and a projected lower corn price in the new marketing year, the DDGS inclusion rate for energy in the feed ration of animals could be adjusted downward, particularly in least-cost diet formulations.

Weekly Corn and DDGS PricesFigure 3. Weekly Corn and DDGS Prices

DDGS Exports

Besides being consumed by the domestic livestock and poultry sectors, DDGS is being shipped to foreign markets where demand for DDGS has been growing. As Table 1 shows, the United States exported a total of 7.6 MMT of DDGS during the 2011/12 marketing year and in 2013/14 DDGS exports reached a record high volume of 12 MMT, increasing 60% from the 2011/12 level.

Behind the substantial increase in U.S. DDGS exports has been the growth of exports to China. Before 2009/10, DDGS exports to China were below 0.1 MMT, but China’s increasing meat consumption and the transition from backyard livestock production to commercial livestock operations have contributed to the growth of China’s demand for DDGS for animal feed (USDA-ERS, 2012b). DDGS exports to China increased from 2.2 MMT in 2009/10 to 6.2 MMT in 2013/14. Exports in 2013/14 represented 52% of total U.S. DDGS exports. So far this marketing year (September 2015 to June 2016), DDGS exports to China declined 25% to 2.8 MMT compared with the same period last year (3.7 MMT) (see Figure 4).

The share of exports to China during the first ten months of the 2015/16 marketing year relative to total U.S. DDGS exports fell to 29% compared with 41%, the share of exports during the same period last year. An investigation by the Chinese Ministry of Commerce in response to petitions from Chinese DDGS producers for an antidumping and countervailing duty against DDGS coming from the U.S. has been dampening DDGS exports to China this marketing year. In addition, continued expansion of DDGS exports to China may be further challenged this year by China’s decision to end the floor price policy. This policy has been a price support policy for corn producers in China and has resulted in high corn stocks and suppressed domestic corn demand because of artificially elevated corn prices. In a Global Agricultural Information Network (GAIN) report (April 2016), the USDA indicated that elimination of the policy is inducing corn prices to decline, encouraging corn feed use in the second half of 2015/16. The report also indicated that imports of feed ingredients, such as sorghum, barley, and DDGS, will be the most immediate casualty of this policy change.

Despite the fall of exports to China during September 2015 to June 2016, U.S. DDGS exports during this period rose 6%, to 9.5 MMT relative to the same period last year. Exports to Mexico, the second largest market for U.S. DDGS, increased 18%, to 1.6 MMT, during this period relative to the same period last year. Other than to China, overall, except for exports to Canada and Japan, which this year (September to June) declined 5% to 0.5 MMT and 19% to 0.2 MMT, respectively, exports to other destinations rose. Exports to Vietnam increased 76.7%, to 0.8 MMT, during this period and represented 8% of total U.S. DDGS exports from September 2015 to June 2016, making Vietnam the third largest market during this period.

U.S. DDGS Exports by Selected DestinationsFigure 4. U.S. DDGS Exports by Selected Destinations

Prospects of DDGS Market

Distillers dried grains with solubles production and sales make an important contribution to the total revenue of dry-mill plants and as such improve the economic viability of these plants. Most of the DDGS production is consumed domestically by the livestock and poultry sectors, so increases in animal numbers, which are expected for beef cattle and hogs this year, may benefit the domestic usage of DDGS.

Exports have increased since the 2007/08 marketing year, with shipments to China representing the largest share of U.S. exports of DDGS since 2009/10. Currently the Chinese Ministry of Commerce is conducting an investigation related to Chinese imports of DDGS from the United States, which has been restraining U.S. DDGS exports to China this marketing year; however, U.S. DDGS exports this year have managed to stay ahead of last year by increasing shipments to Mexico (the second larger market) and other markets. Although falling sales to the Chinese market is a cause for concern, continued expansion to other markets holds the key to the growth and stability of U.S. DDGS exports.

Distillers corn oil is another co-product manufactured by dry-mill plants and is increasingly becoming more relevant in the profitability of these plants (see more information about this topic in a previous article).


Agricultural Marketing Resource Center (AgMRC), 2016. Downloaded August 2016.

Hoffman, L. A., and A. Baker, 2011. “Estimating the Substitution of Distillers’ Grains for Corn and Soybean Meal in the U.S. Feed Complex. October 2011.

Hofstrand, D, 2016.

USDA-ERS (U.S. Department of Agriculture, Economic Research Service), 2016a. Bioenergy Statistics Data. Downloaded August 17, 2016.

———, 2012b. Amber Waves report: “A Market for U.S. Distillers Dried Grains Emerges in China.” December 2012, Vol. 10, issue 4.

USDA-FAS (USDA-Foreign Agriculture Service), 2016. Global Agricultural Information Network (GAIN): Grain and Feed Annual. April.

USDA-NASS (USDA, National Agricultural Statistics Service), 2016. Grain Crushings and Co-Products Production. Multiple reports. Downloaded August 24, 2016.

USDA-WOAB (USDA-World Agricultural Outlook Board) 2016. World Agricultural Supply and Demand Estimates Report (August 12, 2016).