impact of dried distillers grains with solubles (ddgs) on ration and fertilizer costs of swine...

Impact of Dried Distillers Grains with Solubles(DDGS) on Ration and Fertilizer Costs of Swine

Farmers

Stewart Skinner,1 Alfons Weersink2 and Cornelius F. deLange3

1Former Graduate Research Assistant, Department of Food, Agricultural and ResourceEconomics, University of Guelph, Guelph, Ontario N1G 2W1, Canada

(phone: 519-824-4120, ext. 52766; e-mail: [email protected]).2Professor, Department of Food, Agricultural and Resource Economics, University of

Guelph, Guelph, Ontario N1G 2W1, Canada (corresponding author:phone: 519-824-4120, ext. 52766; fax: 519-767-1510; e-mail: [email protected]).3Professor, Department of Animal & Poultry Science, University of Guelph, Guelph,Ontario N1G 2W1, Canada (phone: 519-824-4120, ext. 56477; fax: 519-836-9873;

e-mail: [email protected]).

The feed ingredient price increases that have adversely affected livestock producers may be offsetthrough the use of coproducts from one of the potential reasons for the price increase in ethanolproduction. Dried distillers grain with soluble (DDGS) was found to be a more cost-effective source ofenergy, amino acids, and phosphorus than either corn, soybean meal, or canola meal, and consequently,its inclusion in the ration reduces feed costs by approximately 13% across the three growth phases fora representative Ontario pig farm. It would require a significant increase in the relative price of DDGSbefore it would not be part of the least-cost feed formulation at the maximum rate allowed (25% ofthe ration). The inclusion of DDGS increases the protein and phosphorus content of the ration, andconsequently, the manure content of nitrogen and phosphorus, respectively, if DDGS makes up morethan 15% of the ration. The resulting savings to fertilizer costs associated with DDGS will depend onfactors such as fertilizer prices, crop needs, and manure nutrient changes, but the benefits, regardless ofthe scenario, are significantly smaller than the savings to feed costs. Consequently, the use of DDGSin the swine ration is determined primarily through its ability as a cost-effective source of energy andphosphorus, but the saving has been less than the overall feed ingredient price increase since 2006.

Les augmentations de prix des ingredients entrant dans la composition des aliments pour animauxqui ont touche defavorablement les eleveurs de betail peuvent etre contrebalancees par l’utilisation decoproduits issus de l’une des raisons possibles de ces augmentations de prix, a savoir la productiond’ethanol. Les solubles de distillerie (DDGS) se sont revelees une source d’energie, d’amino-acides etde phosphore plus economique que le maıs, le tourteau de soya ou de canola, et leur utilisation dansles rations a permis de diminuer les couts des aliments pour animaux d’environ 13 p. 100 au cours destrois phases de croissance sur une ferme porcine typique en Ontario. Il faudrait que le prix relatif desDDGS augmente considerablement pour que les DDGS n’entrent pas dans la formulation des alimentspour animaux a moindre cout au taux maximal permis (25 p. 100 de la ration). L’ajout de DDGSaccroıt la teneur de la ration en proteines et en phosphore et, par consequent, la teneur du fumieren azote et en phosphore a condition que les DDGS constituent plus de 15 p. 100 de la ration. Leseconomies de couts des engrais liees a l’utilisation des DDGS dependent de certains facteurs tels quele prix des engrais, les besoins des cultures en elements nutritifs et les changements dans les elementsnutritifs du fumier mais les avantages, peu importe le scenario, sont significativement moins eleves queles economies de couts des aliments pour animaux. En consequence, l’utilisation de DDGS dans laration pour porcs est principalement determinee par la capacite a constituer une source d’energie et dephosphore economique, mais les economies sont inferieures aux avantages alimentaires globaux.

Canadian Journal of Agricultural Economics 00 (2011) 1–22

DOI: 10.1111/j.1744-7976.2011.01237.x

1

2 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS

INTRODUCTION

The livestock sector has faced significant financial pressures since the commodity priceboom of 2006 that raised the prices of feed ingredients but did not alter the prices for theiroutput. The reasons behind the market price movements include factors such as growingincome in developing countries, depreciation in the U.S. dollar, tight stock-to-use ratios,adverse weather in major exporting countries, and speculative behavior by commodityindex funds and governments (Westhoff 2010). Another factor is biofuel policy, whichhas stimulated the establishment of an ethanol industry that now requires a significantshare of corn production in North America (Tyner 2008). Feed ingredient prices haverisen everywhere, but the consequences are particularly significant for hog producers inOntario that have relied on export markets. The increased local demand for corn hasincreased the basis, and thus, raised the price of corn relative to hog prices by more thanits competitors (Mussell et al 2008).

The feed ingredient price increases may be offset through the use of coproducts ofethanol production, in particular, dried distillers grain with solubles (DDGS), as a feedingredient. However, Ontario hog producers have been reluctant to use DDGS becauseof the high variability in its nutritional value. Improved technologies and quality controlmeasures within the manufacturing process have enhanced the consistency and DDGScould be an integral part of a swine ration depending on relative prices (Stein and Shurson2009). For example, it has been shown that product color provides a reasonable and rapidindicator of DDGS quality, which has led to better control of manufacturing processesand reduced variability in the nutritional value of DDGS (Spiehs et al 2002; Fastinger andMahan 2006; McEwen 2008; Pahm et al 2008; Stein and Shurson 2009). The inclusion ofDDGS into a swine ration alters the nutrient content of the feed, and consequently, thenutrients excreted with manure. This change in manure composition could result in furthercost savings or it may impose a cost to hog farmers facing environmental regulations thatrestrict the amount of nutrients applied per unit of land area. It is unknown whetherDDGS is a cost-effective feed ingredient, and if so, whether the savings in its use compareto the increases in feed ingredient prices associated with the increase in corn use in theproduction of ethanol.

A least-cost feed model has been developed by Fabiosa (2008) to examine the impactof using DDGS on cost and nutrient profiles of hog finishing rations. It did so fora representative Iowa operator and did not assess the impact on other growth phasesor how fertilizer decisions may be affected. A number of studies have combined cropmanagement with a least-cost feed model, primarily to assess environmental regulations.Hadrich et al (2008), Stokes and Tozer (2002), and Tozer and Stokes (2001) incorporatemanure nutrient disposal costs into least-cost feed formulation models to illustrate howdairy farms can alter rations to efficiently meet nutrient loading standards. The approachhas also been used to examine hog farms by Yap et al (2004), de Vos et al (2002), Bolandet al (1998, 1999), and Fleming et al (1998) with particular emphasis on cost-effectivemeans to reduce phosphorus loading. This study uses a similar framework to extendthe model of Fabiosa (2008) but with a focus on the effect of DDGS on overall feed andfertilizer costs and how any potential cost savings compare to previous market conditions.

The purpose of this paper is to assess the financial impact of DDGS on the operatingcosts for representative commercial Ontario grower finisher pig farms. The availability of

IMPACT OF DRIED DISTILLERS GRAINS WITH SOLUBLES 3

DDGS as a feed ingredient can alter the least-cost formulated feed ration and this willsubsequently affect the nutrient content of the manure. The change in nutrient availabilityof the manure will change the relative amount of organic and inorganic fertilizer requiredfor crop use, which are further constrained by environmental regulations. The paperbegins with a conceptual framework highlighting the cost-minimizing problem and therole of DDGS on feed and fertilizer costs. The next section describes the empirical modelsincluding a least-cost feed formulation model, a manure nutrient content model, and amodel of fertilizer costs accounting for crop needs and environmental regulations. Thelast section discusses the results and the implications of the findings for the sector.

CONCEPTUAL FRAMEWORK

The availability of DDGS affects two decisions facing a swine farmer: (1) ration compo-sition and (2) application rates of organic and inorganic fertilizer. The farmer is assumedto minimize the cost associated with these two decisions as summarized through thefollowing

MinimizeD,X

(PD D + PX X) + (FertM + FertF ) (1)

subject to G R = G(D,X) (2)

α = α(D,X) (3)

lM = a%NR (4)

FertM = lMAM (5)

L = Crop Area/H (6)

lF = L − lM (7)

FertF = lF (NRpN + AF ) (8)

where D is the amount of DDGS in the swine ration to feed one pig, PD is the price perkilogram (kg) of DDGS, X is the amount of a substitute feed ingredient with a price perkg of PX , (PDD + PX X) is the cost of feeding a pig to gain a weight of GR through theselection of ingredients D and X , G(D,X) is an isoquant, indicating the relative abilityof the nutrients to achieve the weight gain of GR, α is the amount of manure nutrientin kg generated per pig, α(D,X) is the technical relationship between feed ingredients ofthe swine ration and nutrient level of the manure, lM is the area of cropland that can befertilized from the manure of a single pig, NR is the nutrient requirement for the crop inkg per hectare (ha) that is not assumed to vary with prices, FertM is the cost per pig offertilizing with manure, AM is the cost of applying the manure per ha, L is the area per pigspace requiring either organic or inorganic fertilizer that is found by dividing total areaof cropland (Crop Area) by size of the pig herd (H), lF is the area per pig space requiring


inorganic fertilizer and is the remainder of cropland not receiving manure, FertF is thecost of inorganic fertilizer per pig space, PN is the price of inorganic fertilizer, and AF isthe cost of spreading inorganic fertilizer per ha.

If the focus is just on ration costs, then the cost-minimizing input choice is thatthe ratio of the ingredient prices is equal to the marginal rate of technical substitution(PX /PD = GX /GD). This least-cost feed mix choice does not consider the impact onfertilizer costs. Substituting Equations (3)–(8) into Equation (1) results in the followingleast-cost optimization condition

(P∗D/P∗

X = G D/G X)

where P∗D= [PD + (αD/NR){AM − (NR pN + AF )}] (9)

P∗X = [PX + (αX/NR){AM − (NR pN + AF )}] (10)

Accounting for the effect of feed ingredient choice on fertilizer costs alters the relativeprices of the ingredients. Since manure application costs will generally be less than thecosts of inorganic fertilizer and its application cost (AM < NR PN + AF ), the effectiveinput price of the ingredient (Pi

∗, i = D,X) will be lower than the purchase price per kgof each ingredient (Pi, i = D,X) by the extent to which crop nutrient requirements canbe met from organic manure. Assuming that more of each ingredient increases nutrientcomposition of the manure (α i > 0), then the cost-minimizing level of DDGS will increasein the ration if the increase in the nutrient level from D is greater than the other feedingredient (αD > αX ). The effective price ratio is subsequently lower than the purchaseprice ratio (P∗

D/P∗X < PD/PX ) resulting in an increase in the relative amount of D until

the marginal rate of technical substitution is equal to the relative prices.The extent to which the inclusion of DDGS lowers feed cost and potentially fertilizer

costs is an empirical question. It will depend on its nutritional value (Equation (2)), itsimpact on nutrient composition in the manure (Equation (3)), the nutrient requirementsof the crop (Equation (4)), and the costs of purchased inorganic fertilizer relative tomanure application costs. In addition, the fertilizer costs can be affected by environmentalregulations facing the swine farm that will depend on its size as discussed in the nextsection.

EMPRICAL MODELS

The influence of DDGS on ration and fertilizer costs requires three empirical mod-els: (1) a least-cost feed formulation model, (2) a manure nutrient content model, and(3) a fertilizer cost under regulation model. The elements of each model along with thelinkages between them are described further below.

Least-Cost Feed Formulation ModelA least-cost feed formulation model was created with DDGS and 12 other feed ingredientsas choice variables. The ingredients, which are typical of what would be available to anOntario feed manufacturer, are listed in the first row of Table 1, and the second row givesthe respective prices. This linear program optimization model determines the least-cost


ration for three different pig body weights in a typical three phase feeding program:(1) 20–50 kg; (2) 50–80 kg; and (3) 80–120 kg.

The 13 ingredients must meet nine nutritional constraints as laid out by the NationalResearch Council (1998) and represent Equation (2) in the above model. The minimumrequirements for each of the nine nutrients are listed in the last column of Table 1for the 80–120 kg body weight scenario and the nutrient content of the 13 ingredients islisted in body of Table 1 for the corresponding nutrient. The right-hand side values ofthe nutritional constraints change with the other two body weights, but the nutritionallevels of the ingredients are the same across the three phases. In addition to the nutritionalconstraints, there are also nine constraints that limit the amount of ingredients that canbe used in the ration to address issues such as feed palatability and ease of use. Oneinclusion constraint limits DDGS to be less than 25% of the ration because of concernssurrounding carcass quality. It has been shown in various studies that when DDGS levelsin the finishing diet approach, 30% carcass fat quality is compromised (e.g., Xu et al 2010).Even though measures of carcass fat quality are currently not considered in the Canadiancarcass grading and payment system, it is suggested that measures will be implemented tocontrol carcass and pork meat quality when pigs are fed DDGS containing diets (McEwen2008).

Manure Nutrient Content ModelThe change in manure nutrient content from ration choice (Equation (4)) was estimatedwith the swine manure estimation (SME) model that has been adapted for Canadian con-ditions from the mineral accounting system (MINAS) used in the Netherlands (Oenemaand Berentsen 2005). The SME estimates the nutrient content of swine manure by track-ing nutrients as they flow through the farm based on a mass balance approach. While theconceptual framework assumed a single nutrient (α), the empirical analysis uses SME toestimate nitrogen and phosphorus levels in the manure, given by αN and αP, respectively,stemming from feeding programs with and without DDGS.

Nitrogen and phosphorus are introduced to the farm through feed and are removedfrom the farm through the removal of pigs, evaporation of nitrogen with urinary am-monia, and application of manure. Following the entrance of nutrients through the feed,calculated from feed usage and contents of crude protein (nitrogen × 6.25; NationalResearch Council 1998) and phosphorus in the feed, nutrients are then divided into con-sumed feed and wasted feed. Nutrients contained in wasted feed all contribute to nutrientsin manure, while consumed feed allows for some nutrients to be digested and retainedby the pig. Mineral retention rates are determined by body weight gain and the carcasslean yield (Oenema and Berentsen 2005). Carcass lean yield provides an estimate of theamount of protein in the pig’s body and thus nitrogen retention. The impact of carcasslean yield on whole body nitrogen content at the final body weight was adopted to reflectthe Canadian carcass grading system. At a typical carcass lean yield of 61%, the pig bodyat slaughter was assumed to contain 2.56% nitrogen (De Lange et al 2001).

Nutrients that are not retained in pigs are excreted through urine and feces; fecalphosphorus and nitrogen excretion are calculated from feed intake, nitrogen, and phos-phorus levels in the diet and (in)digestibility, as specified for each feed ingredient. Urinaryphosphorus and nitrogen losses are then calculated as the difference between digestiblenutrients supplied with feed and nutrients retained in the pig’s body. Part of urinary


Tab

le1.

Inpu

tsfo

rle

ast-

cost

feed

form

ulat

ion

mod

elfo

ra

grow

er–f

inis

her

pig

phas

e1

diet

Fee

din

gred

ient

s

Soyb

ean

Can

ola

Whe

atD

ryB

aker

yA

nim

al/

Lys

ine-

Lim

e-D

i-m

eal

mea

lD

DG

Ssh

orts

corn

mea

lve

gfa

tH

CL

Thr

eoni

neSa

ltP

rem

ixst

one

Cal

Pri

ces

410

280

172

137

194

200

565

1,80

02,

800

145

4,50

075

620

($/M

T)

Nut

rien

tsN

utri

entc

onte

nts

offe

edin

gred

ient

san

dco

nstr

aint

sfo

rth

eph

ase

3di

etL

evel

sM

etab

oliz

able

den

ergy

(kca

l/kg

)3,

380

2,64

03,

624

3,02

53,

420

3,70

07,

680

00

00

00

≥3,

265

Cru

depr

otei

n(%

)47

.535

.630

.215

.98.

310

.80

00

00

00

≥14

.52

Cal

cium

(%)

0.34

0.63

0.06

0.12

0.03

0.13

00

00

039

20≥

0.49

5To

talP

(%)

0.69

1.01

0.77

0.93

0.28

0.25

00

00

00

18.5

≥0.

44A

vaila

ble

P(%

)0.

160.

210.

410.

380.

040

00

00

00

17.6

≥0.

165

Lys

ine

(%)

2.57

1.91

0.36

0.43

0.17

0.17

078

00

00

0≥

0.51

7M

etho

nini

ne+

cyst

eine

(%)

1.21

1.33

0.76

0.48

0.4

0.35

00

00

00

0≥

0.31

9

Thr

eoni

ne(%

)1.

441.

090.

570.

350.

20.

240

099

00

00

≥0.

33T

rypt

opha

n(%

)0.

520.

330.

110.

150.

040.

080

00

00

00

≥0.

088

Incl

usio

nco

nstr

aint

sM

iner

alpa

lata

bilit

y1

1≤

0.03

Con

sist

ency

1≤

0.05

Flo

wab

ility

11

11

1≤

0.65

Max

DD

GS

1≤

0.25

Max

cano

lam

eal

1≤

0.15

Max

whe

atsh

orts

1≤

0.25

Max

bake

rym

eal

1≤

0.1

Salt

1=

0.00

3P

rem

ix1

=0.

0015


nitrogen is lost through evaporation of ammonia throughout manure storage and appli-cation, which is assumed to be 63% of urinary nitrogen excretion (Aarnink et al 1996).For phosphorus, gaseous losses are not a concern.

In order to estimate the change in nitrogen and phosphorus content of manure whenDDGS are introduced in the diet, all variables are held constant with the exception ofnutritional content of the diets. This is appropriate as the contents of available nutrientsthat determine pig productivity are kept identical for feeding programs with or withoutusing DDGS. The SME model assumed a carcass lean yield at the final body weight formarket pigs of 61%, a 5% feed wastage, and 3.2 pigs produced per pig space annuallyincluding a 2% mortality. The amount of feed used per pig (actual feed intake plus feedwastage) was assumed that to be 50 kg in phase 1, 75 kg in phase 2, and 120 kg in phase 3(De Lange et al 2001). These levels were multiplied by 3.2 to determine the amount offeed fed annually per pig space.

Modeling Fertilizer Costs Stemming from DDGSChanges to the nutrient content of the manure will alter the fertilization costs of thefarmer and potentially land costs depending on the size of the operation and the stockingdensity (hog numbers relative to available land). The empirical model assumes that thereare two nutrients that can be supplied by swine manure and the level of these required bythe crop are NR for nitrogen and PR for phosphorus. Thus, the area of land that can befertilized from the manure of a single pig space (lM) will be based on the ratio of eitherαN/NR or αP/PR. An application rate based on the minimum of these two ratios wouldimply that both nutrient requirements are met for the crop and one will likely be in excess.An application rate based on the maximum of the two ratios would imply that there is noexcess nutrient applied. The determinant of the manure application rate depends on herdsize and land availability; three different scenarios are assumed and these are describedfurther below.

Estimation of the changes in fertilizer costs requires data on application costs. Ma-nure disposal costs are assumed to be $100 per ha, which is based on a 2001 OMAFRAsurvey of custom applicators (OMAFRA 2009a). The cost of spreading inorganic fer-tilizer is $25 per ha from the annual crop enterprise budgets prepared by OMAFRA(OMAFRA 2009a). The prices for nitrogen and phosphorus from inorganic fertilizer areset at $1.08 per kg and $1.10 per kg, respectively; these are prices from local input suppli-ers. Nutrient requirements for corn were obtained OMAFRA’s fertilizer recommendationtables and are based on an assumed yield of 170 bushels per acre (OMAFRA 2009b). Thenitrogen requirements for this yield are 200 kg per ha and 70 kg per ha for phosphorus.

Scenario 1: Farms less than 300 nutrient unitsAbatement efforts required under Ontario’s Nutrient Management Act (NMA) depend onwhether it is below or above the threshold of 300 NU or 1,800 grower–finisher pig places.Farms with fewer than 300 NU are not required to prepare a nutrient management strategyand are not subject to inspection. The potential change in nitrogen and phosphorus levelsin manure can still have an economic impact on these farms through the amount ofsupplementary fertilizer purchased. The small farmer is assumed to set the applicationrate to ensure that crop requirements are met for both nutrients from manure resulting


in the excess application of one nutrient. It is assumed that the excess nutrient does nothave any negative effect on private returns. A potential increase in nutrient content of themanure means that more crop land will be covered with organic fertilizer, which increasesthe cost to the operator. However, there are cost savings to the inorganic component offertilizer for the farmer.

The change in fertilizer cost resulting from the inclusion of DDGS at a level j will bethe difference in fertilization costs between a ration with no DDGS (FertM,0 + FertF,0)and a ration with j amount of DDGS (FertM,j + FertF,j)

�Fertj−0 = (FertM,j + FertF,j) − (FertM,0 + FertF,0) (11)

Since the farmer in this scenario is assumed to be only concerned about using manureto minimize total fertilizer costs and will apply at a level to ensure that crop requirementsare met for both nutrients, the area of land that can be fertilized from the manure of asingle pig with DDGS set at level j will be

lMin, j = Min(αN

j /NR, αPj /PR

)(12)

The fertilization costs per pig for a given ration j can be found by substituting in theappropriate organic and inorganic fertilization costs

�Fertj−0 = (lMin,j − lMin,0)[AM − (NRpN + PRpP + AF )] (13)

The first term represents the change in the area of cropland receiving manure due tothe change in the nutrient composition of the manure. The second term is the differencebetween the cost of disposing manure and the cost of purchasing and applying inorganicfertilizer. This second term is typically negative, and thus, fertilizer costs will decrease ifthe nutrient levels in manure increase with the inclusion of DDGS in the diet.

Scenario 2: Farms greater than 300 nutrient units and with a sufficient land base fornutrient applicationFarms over 300 NU face regular inspection where they must prove adherence to a nutrientmanagement plan that specifies how manure and soil nutrients are analyzed along withassurance that no nutrient is applied in excess of crop requirements. Consequently, theapplication rate of manure and inorganic fertilizer is set by the least limiting nutrient tomeet crop needs rather than the most limiting as in scenario 1. In this first of two largefarm scenarios, it is assumed that the farmer does not face a land constraint and canapply a reduced application rate over more cropland. The maximum land area that canbe fertilized from the manure of a single pig fed a diet with j amount of DDGS and notexceed crop needs is

lMax, j = Max(αN

j /NR, αPj /PR

)(14)

Since the application rate is adjusted to ensure that only one of the nutrient require-ments is met, there will be one nutrient that does not meet crop requirements.


The change in fertilizer costs for a farmer with sufficient available crop land movingfrom a ration without DDGS (j = 0) to one with DDGS in the ration at level j is

�Fertj−0 = (lMax, j − lMax,0)[AM − (NRpN + PRpP + AF )] + [(1 − (lMin, j/lMax, j ))

× (Lim(NRpN, PRpP ) + AF )]lMax, j − [(1 − (lMin,0/lMax,0))

× (Lim(NRpN, PRpP) + AF )]lMax,0(15)

The first part of the first term in Equation (15) represents the change in area receivingmanure due to the inclusion of DDGS and the second part is the difference in cost ofmanure versus inorganic fertilizer. The second term represents the change in cost per pigof supplemental inorganic fertilizer on the area of land receiving manure for a diet withDDGS at level j versus no DDGS in the diet. The application rate under the NMA is set toensure that no excess nutrients are applied so that there will be one nutrient that does notsatisfy the crop nutrient requirement. The cost of this nutrient in $ per ha is designated byLim(NRpN,PRpP) and a portion of it will have to be applied on the land receiving manure.The portion will depend on the application rate without the NMA restriction. The closerthe area receiving manure without concern of excess nutrient (lMin, j) to the area withthe NMA restriction (lMax, j), the less supplemental inorganic fertilizer is required on theland receiving manure. Phosphorus is often the binding nutrient and, indeed, inorganicnitrogen must often be applied to the land receiving manure (Stonehouse et al 2002).

Scenario 3: Farms greater than 300 nutrient units with a constrained land baseThe abatement costs to swine farms depend largely on the amount of available land (deVos et al 2002). In this scenario, the farm is land constrained and the stocking density iscalculated as the number of pigs that can fully fertilize a corn crop per unit of land area.Enhancing the nutrient content of the manure as a result of using DDGS will increasethe number of pig spaces per acre, but both herd size and land area are assumed to beconstraining. Consequently, either herd size will need to be reduced until no more excessnutrients are produced from the manure than can be handled by the fixed crop area orthe land area has to be increased.

The amount of land fertilized by a single pig space without DDGS in the ration(lMax R,0) is set similar to the previous situation under the NMA as

lMaxR,0 = Max (αN,0/NR, αP,0/PR) (16)

The minimum amount of land required to fulfill the standards of the NMA is

LMaxR,0 = (lMaxR,0)HMaxR,0 (17)

which can be resolved to determine the maximum number of pigs that can be raisedwithout exceeding the land constraint

HMaxR,0 = LMaxR,0/lMaxR,0 (18)


The total cost of fertilization per pig under the NMA with a land restriction(TCR,0) is

TCR,0 = AMLMaxR,0 + [(1 − (lMin,0/lMax,0))(Lim(NRpN, PRpP ) + AF )]LMaxR,0 (19)

which can also be expressed on a per pig basis using Equation (17). In contrast to theprevious scenario, there is no third term associated with the cost of inorganic fertilizerapplied to land not receiving manure as LMaxR,0 = L. There is just enough land to applythe manure at a rate that does not create any excess under the NMA.

The use of a DDGS in the ration is assumed to increase the nutrient content of themanure, and given that herd size is fixed at H MaxR,0, then the amount of land necessary toapply manure without exceeding either crop nutrient requirement with a DDGS inclusionrate of j is

LMax R, j = lMax, j HMaxR,0 > LMaxR,0 (20)

The fertilization costs for the land constrained large farmer with a ration includingDDGS is

TCR, j = AMLMaxR,0 + [(1 − (lMin, j/lMax, j ))(Lim(NRpN, PRpP ) + AF )]LMaxR,0

+ Disposal(LMaxR, j − LMaxR,0) (21)

The first term is the same as Equation (19) without DDGS, while the second termis the cost of supplemental inorganic fertilizer on the land, which will vary dependingupon the relative change in nutrient content of the manure. The final term reflects thedisposal cost of manure on land not owned by the operator (LMaxR, j − LMaxR,0). The perunit area disposal costs (Disposal) will vary depending upon the local market conditions.In cases with few livestock operations, the farmer may be paid to dispose of the manureby the other landowner (Disposal < 0), while in situations with a tight land market andmany livestock operations, the farmer may have to pay a market rental rate for the rightto spread the manure on that land. We have assumed that the farmer will not get paidor have to pay to dispose of the manure, but will have to incur a transportation cost forhauling the manure in addition to the present manure application cost (AM).

The resulting change in fertilizer cost from a ration with a DDGS inclusion rate of jis

TCR, j − TCR,0 = Disposal(LMaxR, j − LMaxR,0) + [(1 − (lMin, j/lMax, j ))

× (Lim(NRpN, PRpP) + AF)]LMaxR,0 − [(1 − (lMin, j/lMax, j ))

× (Lim(NRpN, PRpP) + AF )]LMaxR,0 (21)

The abatement cost could also be determined if the livestock farmer decided tomeet the stocking density restriction through a reduction in herd size rather than findingadditional land to dispose of the manure. Given a fixed land base, the maximum number


of pigs from ration j containing DDGS (H MaxR, j) will be

HMaxR, j = lMax, j LMaxR,0 < HMaxR,0 (22)

The abatement costs from cutting back pig numbers AC(H, j) will be similar toEquation (21)

AC(H, j ) = NF IH(HMaxR,0 − HMaxR, j ) + [(1 − (lMin, j/lMax, j ))(Lim(NRpN, PRpP) + AF )]

× LMaxR,0 − [(1 − (lMin, j/lMax, j ))(Lim(NRpN, PRpP) + AF )]LMaxR,0 (23)

The first term represents the profit loss associated with the reduction in hog numberswith NFIH representing the net returns per hog, and the next two terms represent thechange in supplemental inorganic fertilizer applied on the manure land.

RESULTS

Least-Cost Feed FormulationThe ration composition that meets the nutritional requirements at least cost are listed inTable 2 for each of the three growth phases. The total cost of the ration for the 20–50 kgphase is $210 per MT; the costs of the subsequent phases are lower due to the reduction innutrient requirements, when expressed as dietary levels, with increasing pig body weight(National Research Council 1998). DDGS is used at the maximum rate possible acrossall three rations. DDGS along with dry corn and wheat shorts makes up over 80% ofthe ration for each growth phase and approximately 70% of the cost. Soybean mealaccounts for close to 20% of the cost for the phase 1 ration but less than 10% of the rationcontent. Soybean meal is excluded from phases 2 and 3 rations reflecting the increasedcontribution of canola meal to the dietary amino acid and protein supply and the reduceddietary requirements of the heavier pigs.

The final column for each growth phase in Table 2 indicates the percent change inprice required to change the inclusion rates of the feed ingredient. Soybean meal andcanola meal are most sensitive to price changes as also evidenced by their removal fromthe ration for the heavier growth phases. These two ingredients together with DDGSprovide the bulk of crude protein and amino acids, but soybean meal and canola mealare more sensitive to price changes than DDGS because DDGS contributes a higher levelof energy and phosphorus to the ration. The shadow prices on the constraints (data notshown) tend to decline with the weight of the growth phase as do the number of bindingconstraints. Tryptophan has the highest shadow price, but it is used in such a smallamount that it does not have a significant impact on ration costs, whereas the shadowvalue for metabolizabled energy is relatively small but a 1% increase in the amount ofenergy required would increase ration cost by approximately 2%.

It would require a price increase for DDGS of approximately 25% for thephase 3 ration and 35% for the phase 1 ration before DDGS would not be at its maximuminclusion rate of 25%. The shadow price on this maximum inclusion constraint falls aspigs age, while the shadow price for wheat shorts increases slightly. As DDGS has a muchhigher level of crude protein in comparison to wheat shorts and there is a reduced need foramino acids as pigs become heavier, it becomes relatively less valuable as a feed ingredient


Tab

le2.

Rat

ion

com

posi

tion

,cos

tof

rati

on,a

ndin

gred

ient

shad

owpr

ice

ofle

ast-

cost

feed

mix

for

thre

esw

ine

grow

–fin

ish

phas

es

20–5

0kg

50–8

0kg

80–1

20kg

Incl

usio

nC

ost

Shad

owIn

clus

ion

Cos

tSh

adow

Incl

usio

nC

ost

Shad

owIn

gred

ient

rate

(%)

($/M

T)

pric

e(%

)ra

te(%

)($

/MT

)pr

ice

(%)

rate

(%)

($/M

T)

pric

e(%

)

Soyb

ean

mea

l9.

8740

.47

9.35

0.00

0.00

−11.

220.

000.

00−2

0.86

Can

ola

mea

l3.

7910

.61

11.1

07.

9122

.14

9.71

0.37

1.04

3.40

DD

GS

25.0

043

.00

34.9

025

.00

43.0

026

.15

25.0

043

.00

25.2

6W

heat

shor

ts25

.00

34.2

545

.03

25.0

034

.25

47.8

825

.00

34.2

555

.42

Dry

corn

32.7

363

.50

62.9

433

.09

64.1

955

.06

37.3

272

.41

0.78

Bak

ery

mea

l1.

342.

6813

.36

7.09

14.1

94.

998.

5517

.11

4.99

Ani

mal

/veg

fat

0.00

0.00

−19.

540.

000.

00−4

6.27

0.00

0.00

−65.

30L

ysin

e0.

346.

1323

8.49

0.33

5.87

126.

020.

305.

4195

.05

Thr

eoni

ne0.

020.

6840

0.80

0.01

0.22

202.

120.

000.

0213

6.45

Salt

0.30

0.44

–0.

300.

44–

0.30

0.44

–P

rem

ix0.

156.

75–

0.15

6.75

–0.

156.

75–

Lim

esto

ne1.

351.

011,

625.

391.

130.

8512

5.62

3.00

2.25

125.

62D

i-C

al0.

110.

6652

3.96

0.00

0.00

−87.

900.

000.

00−8

7.90

Tota

lrat

ion

100.

00$2

10.1

710

0.00

$191

.88

100.

00$1

82.6

7


for the older pig rations. The relative value of DDGS is further reduced as energy becomesless expensive.

The effect of excluding DDGS at alternative corn and soybean meal prices with aninclusion rate for DDGS of 25% is given in Table 3. Under the base prices assumed for theresults in Table 2 of $172/MT for DDGS, $194/MT for corn, and $410/MT for soybeanmeal, the replacement of soybean meal and canola meal for the less expensive DDGSresults is an increase in costs of $30.73/MT for the 20–50 kg ration, $31.50/MT for the50–80 kg ration, and $24.96/MT (= $240.90–$210.17) for the 80–120 kg ration. DDGS isa significant source of energy for the diets and the removal of the product makes energy inthe ration approximately 13% more expensive across the three growth phases. Corn usageincreases dramatically in the DDGS-free ration as corn is used as the main source ofenergy in these rations. The shadow value for metabolized energy decreases over the threerations, indicating that additional energy units become cheaper as the requirements bythe pig for other nutrients decline with increasing body weight. DDGS is a cost-effectivesource of energy especially for pigs at the higher body weights.

Protein becomes much more expensive in the DDGS-free ration as it is deliveredprimarily by soybean meal and canola meal in the rations including DDGS. The crudeprotein requirement forces in a level of soybean meal that provides a higher dietary level ofseveral amino acids and lysine becomes the only active constraint among the amino acids.When DDGS is utilized and protein becomes cheaper, the model becomes more sensitiveto amino acid constraints and yields rations that exceed the dietary protein requirements.The latter reflects the wider ratio between protein and key essential amino acids (lysine,threonine) in DDGS when compared to soybean meal (Table 1).

The effect of alternative price scenarios given in Table 3 highlight the resiliency ofthe inclusion of DDGS within the diet for a wide range of prices. The base price scenariois highlighted in bold and italics in Table 3. The ratio of the DDGS price to corn andsoybean meal price for this base reference has remained relatively constant over the last5 years. For example, DDGS price to corn price has averaged 0.9 over this period and thehigh correlation of 0.87 suggests that these prices have tended to move together. Thus,the price scenarios used in Table 3 reflect a pessimistic assumption about the relativecost-effectiveness of DDGS. The $230/MT price for DDGS represents the 35% priceincrease suggested by the shadow price for DDGS before there would be a change in theoptimal solution for the base model (Table 2).

DDGS is still a component of the swine ration even if its price rises by 35%, whilethe prices of corn and soybean meal remain constant. The cost savings from the inclusionof DDGS ranges from 5.3% for the 80–120 kg ration to 7.8% for the 10–80 kg hog ration.DDGS is still a cost-effective ingredient even if corn and soybean meal prices are cut byapproximately half; only when the DDGS price is increased to $230/MT and with the lowcorn and soybean meal price assumptions, DDGS is pushed out of the least-cost ration.

Although DDGS can lower the cost of the swine ration by up to 14% under the baseprice conditions presented in Table 1, its increased availability is due to the increase inthe production of ethanol, which has also increased the price of other feedstuffs. Studiesassessing the extent of this increase in feedstock prices find that the percent attributable tobiofuels depends critically on factors such as energy price and government policy (Abbottet al 2008; de Gorter and Just 2010; Taheripour et al 2010; Babcock 2011; FAPRI 2011;Huang et al 2011). An average value of the increase is approximately 40%, which is also


Table 3. Cost of least-cost feed ration for swine grow–finish phases by corn price, soybean mealprice, and DDGS inclusion

Growth phase $ per MTDDGS Corn SoyMeal (% saving from DDGS-free ration)pricea pricea pricea DDGS in($/MT) ($/MT) ($/MT) rationb 20–50 kg 50–80 kg 80–120 kg

172 90 250 Yes 149.23 (0.3) 136.74 (0.4) 125.28 (0.5)325 Yes 164.04 (3.8) 145.99 (4.4) 131.09 (3.7)410 Yes 174.41 (9.6) 150.20 (10.8) 132.53 (9.2)

140 250 Yes 173.24 (2.5) 163.97 (2.2) 158.37 (0.3)325 Yes 182.50 (6.4) 168.42 (7.2) 158.37 (5.4)410 Yes 192.08 (12.0) 171.82 (12.6) 159.00 (10.2)

194 250 Yes 191.18 (5.4) 186.06 (6.4) 182.62 (4.9)325 Yes 201.05 (8.8) 190.14 (9.4) 182.67 (8.8)410 Yes 210.17 (12.8)c 191.88 (14.1) 182.67 (12.0)

230 90 250 Yes 149.74 (0.0) 137.35 (0.0) 125.86 (0.0)325 Yes 170.61 (0.0) 152.60 (0.1) 136.18 (0.0)410 Yes 186.87 (3.2) 162.10 (3.7) 141.46 (3.1)

140 250 Yes 177.67 (0.0) 167.70 (0.0) 158.86 (0.0)325 Yes 194.81 (0.1) 180.31 (0.6) 167.21 (0.1)410 Yes 205.67 (5.8) 184.61 (6.1) 168.69 (4.8)

194 250 Yes 202.14 (0.0) 196.85 (1.0) 192.05 (0.0)325 Yes 215.47 (2.2) 204.36 (2.6) 196.37 (1.9)410 Yes 224.67 (6.7) 205.99 (7.8) 196.71 (5.3)

n/a 90 250 No 149.74 137.35 125.87325 No 170.61 152.68 136.18410 No 192.98 168.30 145.95

140 250 No 177.67 167.70 158.87325 No 195.06 181.40 167.45410 No 218.36 196.62 177.11

194 250 No 202.15 198.85 192.05325 No 220.38 209.83 200.20410 No 240.90 223.38 207.63

Notes: aAll other prices are held constant as shown in Table 1.bThe maximum inclusion rate for DDGS is 25% and this value is used in the analysis.cThe baseline model results with most likely relative prices.

close to the amount of the U.S. corn crop currently required to meet domestic ethanolproduction needs.

The effect of the range in feedstock prices that have occurred over the last severalyears, regardless of whether biofuel production has contributed to the price change, onration costs is also illustrated in Table 3. When corn and soybean meal prices fall byapproximately half to levels experienced prior to the price boom of 2006, then the costof the phase 2 ration drops to $137/MT regardless of whether DDGS is in the ration.This approximate 40% decrease in feed costs with the lower price scenario comparedto current price conditions reflects the frustration expressed by the livestock sector over


Table 4. Annual nitrogen (N) and phosphorus (P) flows per pig space by DDGS dietary inclusionrate

DDGS dietary inclusion rate (%)

0 5 10 15 20 25

Nitrogen (kg/pig space)Amount entering with feed 18.7 18.7 18.8 19.7 20.7 21.7Wasted feed 0.9 0.9 0.9 1.0 1.0 1.1Retained in pig 6.8 6.8 6.8 6.8 6.8 6.8Excreted with urine 8.8 8.8 8.9 9.7 10.5 11.3Excreted with feces 2.1 2.1 2.1 2.2 2.4 2.5Nutrient retention efficiencya (%) 36.3 36.3 36.0 34.4 32.7 31.4Available nitrogen in manure 6.3 6.3 6.3 6.8 7.3 7.8

Phosphorus (kg/pig space)Amount entering with feed 4.4 4.4 4.4 4.4 4.5 4.6Wasted feed 0.2 0.2 0.2 0.2 0.2 0.2Retained in pig 1.3 1.3 1.3 1.3 1.3 1.3Excreted with urine 0.1 0.1 0.2 0.2 0.3 0.4Excreted with feces 2.8 2.7 2.7 2.7 2.7 2.7Nutrient retention efficiencya (%) 29.6 30.0 29.5 29.5 29.0 28.4Available phosphorus in manure 3.1 3.0 3.1 3.1 3.2 3.3

Note: aRetention efficiency = (retention/supply) × 100.

the change in feed markets prices. If corn and soybean meal prices both dropped byapproximately 50%, then the cost of the phase 2 ration without DDGS drops from$223.38/MT to $181.40/MT. Since the use of DDGS at the higher price scenario reducescosts to $191.88/MT, approximately two-thirds of the feed price increase can be offsetby DDGS use. The effect of including DDGS is particularly pronounced when soybeanmeal prices are relatively high since DDGS is a cost-effective substitute in the ration. Theresult is consistent with Beckman et al (2011) who find that DDGS demands tend to bemore price responsive to energy-oriented feeds as opposed to protein-oriented feeds.

Dietary DDGS Levels and Nutrient Content of ManureGiven the higher protein content in rations with DDGS, the feeding of DDGS results inhigher levels of nitrogen in the manure (Table 4). In contrast, the least-cost DDGS-freerations only provide the minimum level of crude protein in all phases to supply sufficientlevels of limiting essential amino acids (e.g., lysine). Usage of crude protein, representingthe sum of all amino acids, is the primary driver of nitrogen excretion, and for the rationscontaining 15% or more DDGS, the dietary protein levels exceed the pigs’ requirements.

In the case of phosphorus, excretion levels are influenced primarily by the totalamount of phosphorus fed relative to the pig’s available phosphorus requirements. Therations containing higher rates of DDGS consistently have higher levels of total phos-phorus than DDGS-free rations. Furthermore, the levels of available phosphorus exceedminimum requirements in phase 2 and phase 3 of the DDGS rations and supplementalinorganic phosphorus (from dicalcium phosphate) is not needed in these diets. The higher


levels of both total and available phosphorus indicate that the excretion of phosphoruswill increase when high levels of DDGS are contained in the feed. These results pre-dicted from SME are consistent with field trials from Widyaratne and Zijlstra (2007) andWhitney and Shurson (2004).

The levels of nitrogen and phosphorus entering the farm through feed are higherwhen DDGS is included in the feed at levels of 15% or higher. This has direct implicationsfor nutrients entering the manure through wasted feed. Wasted feed contributes directlyto nutrient content of manure. If feed wastage increases, the impact on the manure willbe greater when DDGS is present in the ration at the higher levels. The inclusion ofDDGS in the ration lowers retention efficiency by 13.5% for nitrogen (e.g., from 36.3at 0% DDGS inclusion to 41.4% at 25% DDGS inclusion) and increases the availablefertilizer nitrogen content of manure by 24% (e.g., from 6.3 to 7.8 kg/pig place/year). Ina similar manner, the retention efficiency is reduced by 4.1% for phosphorus and availablefertilizer phosphorus content of manure is increased 6% when the level of DDGS in theration is increased. Nitrogen efficiency is reduced because crude protein levels in rationscontaining 15% or more DDGS rations are higher than minimum requirements. Theincrease in total phosphorus for rations containing 20% or more DDGS contributes tothe reductions in phosphorus retention efficiency.

DDGS and Fertilizer Costs under Environmental RegulationsThe impacts of DDGS inclusion on fertilization costs per pig space are summarizedin Table 5. The costs are given for three potential components of fertilization: manuredisposal, additional inorganic fertilizer required on land receiving organic fertilizer, andinorganic fertilizer requirements on land where no manure is applied. Abatement costs inparentheses indicate a reduction in fertilizer costs from higher DDGS inclusion rates.

Farms with fewer than 300 NU are not required to prepare a nutrient managementplan, and consequently, it applies manure at a rate to ensure that all nutrient requirementsof a corn crop are met. The nutrient that is limiting in the assumed example under thebase scenario is nitrogen since the area that can be fertilized per pig is less than that forphosphorus (0.0315 versus 0.0443). Consequently, manure application will be at a rate toensure that nitrogen requirements are met and the resulting phosphorus application levelsin the field will be greater than the required 70 kg per ha. The total fertilization costs perpig in the base are $1.89 for manure (FertM,0) and $16.62 for inorganic fertilizer (FertF,0).Note that these costs per pig are absolute values. FertM,0 is directly related to the numberof pigs and not affected by land area, while FertF,0 is inversely (directly) related to herdsize (land area).

Increasing the level of DDGS in the ration initially has no effect on the level ofnitrogen in the manure, and consequently, no effect on the area receiving manure. Afteran inclusion rate of 10%, the amount of the limiting nutrient, nitrogen, excreted perpig increases by approximately 0.5 kg for every 5% increase of DDG in the ration. Theincrease in nitrogen content decreases the amount of inorganic fertilizer required andthereby lowers total fertilizer costs by $0.55 per pig for the 15% inclusion rate, $1.10 perpig for the 20% rate, and $1.65 per pig for the 25% rate. These cost savings per pig arerelative and do not change with herd size or land area.

If an operation produces more than 300 NU, the farm must complete a nutrientmanagement plan to ensure that manure application does not result in the excess of any

IMPACT OF DRIED DISTILLERS GRAINS WITH SOLUBLES 17T

able

5.T

heim

pact

ofD

DG

Sin

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ion

rate

onto

talf

erti

lizer

cost

($pe

rpi

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GS

diet

ary

incl

usio

nra

te(%

)

05

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2025

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spac

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4.43

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3.13

2.78

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60


nutrient. The cost of the NMA is found by comparing the fertilization cost when thearea that can be fertilized per pig space is based on lMax, j (Equation (14)) as opposed tolMin,j (Equation (12)). The amount of land receiving manure under the NMA increases asapplication rates must decrease to ensure that phosphorus is not applied at a level beyondthe requirements of the corn crop. The farmer must apply supplemental inorganic nitrogento the area receiving manure. The net effect of using a standard based on phosphorusrather than nitrogen is an increase in fertilizer costs of $0.31 per pig regardless of farmsize. The inclusion of DDGS decreases this cost to approximately $0.20 per pig becausethe relative amount of nitrogen increases, and thus, the amount of supplemental inorganicfertilizer decreases.

Adding DDGS to the swine ration has little effect on costs at the 5% and 10%inclusion rates for the large farm not facing a stocking density restriction since thenutrient content of nitrogen and phosphorus is relatively unaffected by the addition ofsmall amounts of DDGS. At a DDGS inclusion rate of 15%, manure phosphorus is at3.1 kg per pig, and so, the area receiving manure remains constant and subsequentlymanure disposal costs do not change. However, the increased nitrogen content in themanure reduces the need for supplemental nitrogen on the area receiving manure and thisdecreases overall fertilizer costs by $0.61 per pig space. Phosphorus levels in the manureincrease with DDGS inclusion rates beyond 15% and this increases the amount of landrequired to spread manure in order to comply with the NMA. While manure disposalcosts rise by approximately $0.15 per pig, this is more than offset by two cost componentsfor inorganic fertilizer. The area requiring inorganic fertilizer is reduced and this lowerscosts by $0.46 per pig since manure disposal costs are less than the costs of inorganicfertilizer [AM < (NRpN + PRpP + AF )]. In addition, the amount of supplemental nitrogenrequired on the manure land falls since the relative increase is greater for nitrogen thanphosphorus. The net result is that DDGS lowers fertilizer costs by $1.19 per pig for the20% DDGS inclusion rate and $1.77 for the 25% inclusion rate. These cost savings fromDDGS are slightly higher for the large farm scenario than the smaller farm not operatingunder the NMA.

The final scenario assumes that the large farm is facing a stocking density constraintso that any increases in the nutrient content of the binding nutrient will require eithermore land or a reduction in herd size. In the first case, the number of hogs is kept constantat 3,000 hogs as in the second scenario. With no DDGS in the ration, the minimumamount of land necessary for the farmer to dispose of all manure and yet not exceed anyof the crop nutrient requirements is 132.9 ha. Total fertilizer costs per pig are the same onthe manure land as in the previous scenario, but there is no land receiving just inorganicfertilizer by definition.

The use of DDGS at an inclusion rate of 5% lowers the phosphorus content ofthe manure to 3 kg per pig, which results in approximately 4 ha of the total landbase that cannot be fertilized by manure and requires inorganic fertilizer. The net ef-fect on changes in fertilizer cost is the same as in the large unconstrained scenarioas it is for the inclusion rates of 10% and 15% since the manure phosphorus levelsare not raised above the base case without DDGS. The 20% and 25% DDGS inclu-sion rates require 137 and 141 ha of land, respectively, but the farm is constrained to132.9 ha. The disposal costs on this additional land increase overall costs but this is morethan offset by the savings in nitrogen costs on the owned land due to the increase in


Table 6. Impact of DDGS inclusion on feed and fertilizer costs ($ per pig)

DDGS dietary inclusion rate (%)

5 10 15 20 25

Small FarmFeed cost savings 9.51 14.10 17.12 19.68 22.06Fertilizer cost savings 0.00 0.00 0.55 1.10 1.65Total cost reduction 9.51 14.15 17.67 20.78 23.71

Large unconstrainedFeed cost savings 9.51 14.15 17.12 19.68 22.06Fertilizer cost savings 0.03 0.00 0.61 1.19 1.77Total cost reduction 9.54 14.15 17.73 20.87 23.83

Large constrainedFeed cost savings 9.51 14.15 17.12 19.68 22.06Fertilizer cost savings 0.03 0.00 0.61 0.77 0.90Total cost Reduction 9.54 14.15 17.73 20.45 22.96

nitrogen content of the manure associated with the higher levels of DDGS. The result isa reduction in fertilizer cost savings compared to the unconstrained scenario, but thereare still reductions in fertilizer cost. Only if disposal costs approach land rental values insouthwestern Ontario, there are no reductions in fertilizer costs. This is due to the smallchange in additional manure area required with the higher phosphorus content and thegreater relative increase in the most valuable nutrient nitrogen.

The second case of the large farm with a stocking density restriction assumes thatthe land base is fixed at 150 ha as in the second scenario and any changes necessaryto meet the NMA are done through changes in herd size. Given the nutrient contentwith no DDGS in the ration, the maximum herd size without exceeding the phosphorusrequirements on the 150 ha of corn is 3,387 hogs. The initial use of DDGS lowers thephosphorus content and allows herd size to increase on the fixed land base resulting in acost savings to the firm. There are no changes to the base ration with a 10% inclusion ratesince manure content is the same, whereas the only change with a 15% inclusion rate isa higher nitrogen content that lowers supplemental inorganic nitrogen without changingthe size. The nitrogen fertilizer savings associated with the last two DDGS inclusionrates that lower overall costs in the unconstrained case are offset by the reduction inhog production necessary to meet the NMA. The increase in cost is proportional to theincrease in manure nutrient content and the net returns to hog production.

Effect of DDGS on Ration and Fertilizer CostsThe total cost savings resulting from the inclusion of DDGS in the swine ration aresummarized in Table 6. The savings are almost exclusively due to the reduction in feedcosts and these savings increase with the level of DDGS included in the ration. Reductionsin fertilizer cost increase with the level of farm size due to the influence of the NMA. Therelative nitrogen content in the manure resulting from more DDGS lowers the amount ofinorganic fertilizer required and thus production costs. While this value could be affectedby changes in fertilizer prices and application costs, the fertilizer costs savings represent a


maximum of 10% of the total cost savings accruing from the use of DDGS. The benefitsof DDGS are due primarily to the savings in feed costs and these are not influenced byfarm size.

CONCLUSIONS

While increased ethanol output levels have contributed to higher feedstock prices, anassociated coproduct, DDGS, is a cost-effective ingredient in livestock rations and canact to temper the overall increase in feed costs. Given the prices for feed ingredientsthat were used in the current analyses, the inclusion of DDGS in the ration reduces feedcosts by approximately 13% across the three growth phases for hogs. DDGS is a morecost-effective source of energy, amino acids, and phosphorus than corn, soybean meal,or canola meal and is used at the maximum inclusion rate of 25% under the base modelassumptions. It would require a 35% increase in the relative price of DDGS before itwould not be used at this maximum inclusion rate and a much larger price increase beforeit would not be part of the least-cost feed formulation.

The inclusion of DDGS in the swine ration increases the protein and phosphoruscontent of the ration, and consequently, the manure content of nitrogen and phosphorus,respectively. The increases are minimal if the DDGS makes up less than 15% of theration, but beyond this inclusion rate, there are increases to both nutrients with nitrogenincreasing at a relative higher rate. The consequence of the higher nutrient content ofthe manure depends on the size of the farm and inclusion rate. On small farms, manurecan be applied at a rate to ensure that all crop requirements are met, and subsequently,applications rates are based on the most limiting and valuable nutrient nitrogen. Increasesin the nitrogen level of manure, due to increased DDGS usage, will thus lower inorganicfertilizer needs. Large farms need to base their levels of manure application on phosphorusto prevent excess nutrient loading. Higher nutrient content of the manure increases thearea on which manure is applied, but this higher cost is offset by the savings in inorganicfertilizer. Only if there are significant restrictions of stocking density, there will be coststo the higher nitrogen and phosphorus levels in the manure from the use of DDGS in theswine ration. Consequently, the use of DDGS in the swine ration is determined primarilythrough its ability as a cost-effective source of energy and phosphorus.

Biofuel production has contributed to the higher costs for feedstuffs. The least-cost ration using current feed ingredient prices and those existing prior to the priceboom in the fall of 2006 indicate that feed costs for swine farmers have increased byapproximately 40%. The reduction in these costs of approximately 15% through theinclusion of DDGS illustrates that the coproducts of biofuels can mitigate their impactsand should be considered within an aggregate analysis of their effects as suggested byTaheripour et al (2010) and Huang et al (2011). The linkages between the energy, biofuel,and feedstuff markets also suggest that DDGS will likely remain a cost-effective feedingredient. While the supply of DDGS has increased dramatically with ethanol levels, itsrelative price to other feedstuffs has not deviated significantly. The potentially negativeeffect on DDGS price from its increased availability has been offset by the increase in thedemand for corn in ethanol production and thus its higher price. The linkages betweenthe feedstuff markets imply that the relative price ratios will not be significantly altered,and thus, DDGS will likely be a cost-effective feed ingredient for swine farmers as well asother livestock producers.


ACKNOWLEDGMENTS

The authors thank the CJAE editor and reviewers for their constructive comments. Theauthors also wish to acknowledge the financial support provided by the Ontario Ministryof Agricultural Food and Rural Affairs and Ontario Pork. Weersink also wishes toacknowledge the support of the Business Economics Group, Wageningen University.

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