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DTN Distillers Grain Weekly Update
Friday, June 26, 2015 7:58AM CDT

By Cheryl Anderson
DTN Staff Reporter

An epidemic of avian influenza has ravaged many Midwest poultry operations since December, resulting in the destruction of millions of chickens and turkeys. With the loss of so many birds, the ethanol industry is also feeling the effects due to the loss of dried distillers grain sales to the poultry industry.

The highly pathogenic avian influenza (HPAI) was first detected in December 2014 and quickly became an epidemic. The U.S. Department of Agriculture's Animal and Plant Health Inspection Service has reported there have been a total of 222 detections of HPAI involving more than 47 million birds.

The total number of birds euthanized now totals approximately 7.5 million turkeys and more than 41 million layer chickens and pullets, according to Dr. T.J. Myers, associate deputy administrator of veterinary services for APHIS. Myers told DTN that APHIS' indemnity commitment to cover producers' cost of the fair market value of the birds, disinfection and equipment replacements now stands at about $187 million.

The HPAI epidemic has also caused an estimated 10% or more decline in national egg production, according to Rafael Rivera, food safety and production manager for the U.S. Poultry and Egg Association.

USDA's National Agricultural Statistics Service reports that in 2014, the U.S. poultry industry produced 8.54 billion broilers, 99.8 billion eggs, and 238 million turkeys. The combined value of production from broilers, eggs, turkeys, and the value of sales from chickens in 2014 was $48.3 billion, up 9% from $44.4 billion in 2013.

Distillers grains are widely used as feed in the poultry industry, especially for laying hens, according to Sheila Purdum, professor of poultry nutrition at the University of Nebraska-Lincoln.

DDG are fed to poultry mostly for their high energy and protein content.

Typically, the inclusion rate for poultry is between 5% and 10% of the daily rations. The only limiting factor in the inclusion of DDG in poultry rations is fiber, as poultry can't digest the complex fibers in distillers grains, Purdum said. However, some of the new, fractionated low-fiber DDG products could be well-suited for the poultry industry.

Purdum said the new low-oil DDG can lessen the amount of energy availability in poultry rations; however, if the price if cheap enough, producers will still likely make DDG work in the ration.

The largest determining factor in DDG's inclusion in poultry rations is cost, Purdum said. Especially vital is the cost of protein in DDG relative to the cost of protein in soybean meal and corn, the two ingredients that are DDG's biggest competitors.

Also factoring in the decision of poultry producers to use DDG is the operation's proximity to an ethanol plant, as well as the plant's ability and willingness to deliver dry product.

Purdum said she has no doubt that the avian influenza has put a dent in sales of DDG.

"I would assume that most of the birds destroyed are in areas where the majority of ethanol and DDG are product, so I have no doubt this has hurt the market considerably," she said. "If you take 50 million birds consuming 5% of DDG in their diet, that's a loss of more than 250 tons a day. It's quite significant."

Sean Broderick, senior merchandiser for CHS in Minneapolis, said he has seen the effects of HPAI, but on a more regional basis, particularly in western Minnesota and northwest Iowa. However, the dip in demand may have resulted in DDG prices decreasing.

"A lot of the operations were not using DDGS to the max in their rations, but, as they also did not consume other local products they may have been using like corn or soymeal, the addition of those products back into the market helped push down on prices as well," he said.

Joel Karlin, contributing DTN market analyst and commodity manager for Western Milling in Goshen, California, said he believes the HPAI epidemic had less of an impact.

DDG fits into a bird ration when it is very cheap compared to other protein feed and, until recently, this was not the case. Also, there are many poultry producers who do not incorporate DDG in their rations due to some deleterious effects on the carcass, Karlin said. "My understanding is that for most poultry producers, the diet is essentially corn and soybean meal with little substitution."

Some merchandisers told DTN that purchasing from the poultry industry had waned even before HPAI began to spread because DDGS prices were so high and some of those customers had pulled it from their rations.

Other DDGS merchandisers said that despite the decreased demand from the poultry sector, swine numbers are up substantially this year. The increased swine demand, along with lower DDGS prices that have increased inclusion rates from other sectors such as the beef market, have offset some of the dip in demand from poultry producers.

In addition, some poultry producers are beginning to repopulate, so that demand may recover as bird numbers increase over the next 60 days.

Another merchandiser commented that in May, rail prices were very good, but prices have decreased, possibly from a drop in demand from poultry producers that typically get shipments by rail. However, rail prices also may have decreased due to excessive rains and flooding causing problems with loading and barge shipments.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com.



Grains Council Educates Japanese Swine Producers on DDGS

The U.S. Grains Council recently sent a team to the International Poultry and Pigs Show 2015 in Japan to educate Japanese swine producers with the latest information on U.S. dried distillers grains with solubles, according to an article by the council (http://bit.ly/…).

Currently, Japan is the seventh-largest importer of U.S. DDGS, importing 98,650 metric tons so far this year. However, the council believes that market could grow as there is room for expansion of inclusion rates in the country's livestock rations.

The council team that traveled to Japan was part of its ongoing efforts to build international awareness and demand for DDGS. The team included Dr. Gerald Shurson, professor of swine nutrition and management at the University of Minnesota, and Bruce Roher, past president of the Iowa Corn Growers Association and Council staff and consultants.

Those swine producers in attendance were given technical information on subjects that could enhance productivity, such as DDGS inclusion rates, nutritional benefits, etc.

The low-oil DDGS that have become popular in the U.S. should not be a problem for swine producers; in fact, the lower oil content should increase use by the Japanese swine industry. To date, the higher levels of oil in DDGS have been a limiting factor, as it makes the fat in pork excessively soft, an undesirable quality.

Another limiting factor has been price, making U.S. DDGS less competitive in Japanese markets. However, the council is confident that further promotion and education will work to increase sales when prices are lower.

The council will follow its work at the show with visits to individual feed companies and continuance of a series of technical seminars that distribute nutritional information about U.S. DDGS to Japan's livestock industry.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com


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