Written Testimony of
Gene Gourley
Pork Producer,
On Behalf of the National Pork
Producers Council and
the
January 10, 2007
INTRODUCTION
I am
Gene Gourley of Webster City, Iowa, and I want to thank the Chairman and the Members
of the Committee for inviting me to speak to you today regarding the use of
distillers grains in swine diets. I use my master’s degree in animal nutrition
on a daily basis as a partner with my three brothers in our family’s
farrow-to-finish swine operation and as general manager of the Nutrition and
Research Division of Swine Graphic Enterprises (SGE), a 25,000-sow commercial
operation 95 percent-owned by
The
National Pork Producers Council is the global voice of the
The
Iowa Pork Producers Association represents more than 8,900 pork producers, who
produce about a quarter of all the hogs raised in the
The
pork industry is of immense importance to the state of
While I am speaking to you only as Gene Gourley, swine nutritionist and hog farmer, my involvement in many industry organizations and activities give me a chance to talk to many pork producers. I believe I will accurately represent the sentiments of thousands of pork producers nationwide.
DISTILLERS
GRAINS AND SWINE DIETS
The ethanol industry would
have us believe that all of the feed problems created by using a substantial
portion of the nation’s corn supply for ethanol production are irrelevant
because of the production of distillers grains, a major co-product of the ethanol
production process. I am here today to tell you that this product does little
to allay the concerns of pork producers regarding the future cost and
availability of feedstuffs and consequently, the well-being of our animals and
the cost of pork to
There are several issues with regard to feeding distillers dried grains with solubles (DDGS) to pigs.
First, DDGS are quite inconsistent from ethanol plant to ethanol plant and even within a plant. There is variability in their nutrient content – protein, fat, phosphorus. If the fermentation or drying process for DDGS is changed or varies from batch to batch, it can have an impact on the digestibility of nutrients.
Additionally, corn can contain mycotoxins that are, in some instances, detrimental to pig performance. The presence of mycotoxins varies by growing season, location and environmental factors. Since the ethanol production process removes the starch (two-thirds of the volume) from corn, DDGS produced from mycotoxin-contaminated corn will have three times the level of mycotoxin that was present in the corn itself. Based on the percentage of DDGS fed and which toxins are present, pigs can experience multiple problems, including immune challenges, abortion and feed refusal. This is a severe limit on the widespread use of DDGS in gestation and lactation diets.
As pigs are fed increasing levels of DDGS, the corn oil present (also at three times the concentration as in corn grain) can increase the iodine value (soft fat) of the carcass. This can result in belly slicing problems and possible rancidity or shelf-life issues. A higher percentage of DDGS in the diet also can have a negative affect on carcass weights, most likely due to the increased fiber content of the DDGS.
Other concerns with DDGS include:
- Flowabililty – As plants try to extract more ethanol from every bushel of corn, some plants grind the corn into a finer material, creating flowability problems of the DDGS at the feedmill as well as in the complete feed in the feed bin.
- Pelleting – DDGS have been shown to decrease the pelleting efficiency at feedmills. As increased efficiency is needed from the pig due to higher feed costs, more feed will be pelleted. This will increase processing costs.
- Processing changes – Several plants are looking at extracting other co-products from the DDGS stream, such as the oil for bio-diesel, and at further refining the protein fraction. The feed value of these co-products to swine must be researched.
- Phosphorus levels – In late finishing, the pigs’ phosphorus requirements can be fairly low. Higher percentages of DDGS fed to pigs could increase phosphorus levels and increase excretions, which must be factored into nutrient management plans and may restrict its use at higher levels in late finishing rations.
- Enzyme uses – There are major efforts to develop enzymes to help convert fiber in the DDGS to glucose for energy. Initial efforts have not yielded positive results, but resources are being put toward making it work.
Concerning the predictability of co-products, livestock producers need to know:
- What are each plant’s by-products and how long will they be available in that form?
- Are the co-products capable of being fed to livestock? If so, which species?
- Are they locally available to livestock producers?
- What are the storage, transportation and marketing specifics of each plant’s by-product?
- What is the relative feeding value of the by-product being produced and how is it determined consistently across all plants?
These issues need to be considered not only for existing plants, but proposed plants will eventually need to provide this insight. Otherwise, there is little incentive for livestock farmers to support more ethanol plants at the expense of lowering the corn supply.
COMPETITIVE EFFECTS OF DDGS
Corn usually comprises about 75 percent of a pig’s diets. The ethanol production process uses 56 pounds of corn and yields only 17 pounds of DDGS. Further, most pork producers will only include DDGS in swine diets at a 10 percent level due to the problems outlined above.
Finally, DDGS are far more useful in diets for beef and dairy cattle than they are for pork and poultry. This impacts pork producers in two ways, both of them bad. First, it means that DDGS will not be a cost-effective substitute for corn because beef and dairy producers will pay more for DDGS and thus prevent them from entering swine diets. This is already happening. Second, the cost of producing beef and dairy products using DDGS will be lower relative to pork than in the past and thus provide a market advantage to these two sources of protein.
CORN SUPPLIES ARE AN IMPORTANT ISSUE TO
PORK PRODUCERS
While the pork industry appreciates the opportunity to discuss DDGS, the most important issues regarding ethanol and livestock are the availability and cost of feed when that feed’s usage as an ethanol feedstock is subsidized, the usage of ethanol is mandated at minimum levels and the domestic market for ethanol is protected. These all have profound implications for our business – an industry that adds considerably to the nation’s economy.
A recently completed study
by economists Daniel Otto and John Lawrence of
In
Pork producers operate on
very tight margins, and they have an enormous respect for market forces. Producers
have not asked for any form of government subsidies in previous farm bills, and
the industry is among the most vocal advocates of free trade and free trade
agreements. New technologies have been adopted and productivity has been increased
to maintain the
PORK
PRODUCERS’ CONCERNS ABOUT ETHANOL
Until recently, the pork
industry was very optimistic about its future. Continued worldwide demand for
pork and pending free trade agreements with
Last summer, however, the
optimism began to fade in large part because the principal source of the
industry’s competitiveness – abundant feed grains – was being diverted to
biofuel production, particularly ethanol.
Almost everyone in
Once world crude oil
prices hit $60 a barrel, the ethanol industry did not need support. However,
the government continued to support the industry, and this proved to be a boon
for those who owned the ethanol plants. These plants were buying corn at $2 per
bushel and turning it into $6 or $8 worth of ethanol. They also were benefiting
from a host of state and federal tax credits and outright construction
subsidies from the USDA and from individual states.
Prices also are high
because ethanol is being used as an oxygenate and because the
While the Iowa Pork
Producers Association and the U.S. pork industry support the development and
use of alternative and renewable energy sources, including ethanol, as a way to
reduce the nation’s dependence on foreign oil, the explosion in ethanol demand
has raised concerns and fears among pork producers about feed grain
availability and price, the transition time and about the ability to use the
by-product of the ethanol process.
According to data from the
Renewable Fuels Association (see attachment), the annual corn need of the
ethanol industry has gone from 1.7 billion bushels just six months ago to just
under 2 billion bushels today[1]. RFA now
estimates that 4 billion bushels of corn will be used by the ethanol plants
that will be on line as of January 2008.
To put all of this in
perspective, with average yields of 157 bushels per acre, the growth in the
ethanol industry in just one year will either require an additional 12.5
million acres of corn or cutbacks in livestock production or exports. To give
another perspective,
Why does the ethanol
industry have such enormous expansion capacity? First it is selling an energy
product that ultimately competes with crude oil.
The growth in ethanol
production might slow if corn prices rise. According to a recent CARD study, under existing ethanol tax policy, if the prices of crude
oil, natural gas and DDGS stay at current levels, the break-even corn price for
the ethanol industry is $4.05 per bushel[2]. (The ethanol industry receives subsidies that
amount to $1.53 per bushel of corn and a blender’s tax credit of $0.51 per
gallon.) It will be difficult for producers to compete against ethanol for corn as
long as the ethanol industry receives the subsidies it does.
At $4.05 per bushel, the CARD study found, corn-based ethanol
production would reach 31.5 billion gallons per year, or about 20 percent of
projected
Dr. Bob Wisner at
Dr. Wisner also points out
that his forecast assumes that corn exports this year will increase by the 2.5
percent projected by the USDA. However, corn export sales to date are running
35 percent above the same period last year. If this pace of export sales
continues, the country will simply run out of corn. It may be that the recent
surge in export sales is an aberration, but it also may be true that corn
importers have begun to stockpile because they realize that the
Most farmers already have
made their 2007 planting decisions and have arranged seed supplies. Projections
are that about 26 million acres of corn will be needed to supply the ethanol
industry by 2008, about half of which will be for new plants that come on line
in 2007. The corn futures market price for 2007 has been providing a strong
incentive for farmers to plant more corn acres, but there simply may not be
enough corn to meet the country’s food, fuel and feed needs – and any shortfall
would be acerbated by a short crop.
The CARD study predicted that corn availability for
livestock feed would fall by 33 percent, from about 6 billion bushels to 4
billion bushels, causing reductions in the size of the U.S. pork and poultry
industries. (The beef and dairy industries likely would use DDGS to offset the
reduction in corn availability.)
Another concern is the
impact that ethanol already has had on producers’ feed costs. This time last
year, production costs were about $40 per hundred pounds or less. Just last
week, Dr. Ron Plain calculated that with the feed price increases that
producers already have seen, their production costs will be $50 per hundred
pounds[3]. This represents a 25
percent increase in costs. At the $4.05 per bushel predicted by the CARD study, pork
producers’ production costs would increase by 31 percent.
But the pork industry will
adjust as it always has. High production costs will reduce profitability, and
at first many producers will try to ride it out, hoping that other producers
will blink first. Eventually bankers will be forced to foreclose on some
operations, and some producers will simply decide to retire early. Eventually
production will fall by enough to bring the market to its new equilibrium. According
to CARD, pork production would need to decline by 10 to 15 percent
to allow the industry to recoup the higher production costs.This adjustment could take
years.
Wouldn’t corn growers be
will able to use the extra profits from corn to subsidize their pork habit? While
this may be true for about a year, eventually cash rents will adjust to higher
corn prices, and/or production costs for corn will go up along with producers’
production costs for pork. The real beneficiaries of the ethanol boom are
landowners.
Another concern is
transportation costs. Hogs have always been produced where corn and soybeans
are grown because it is so expensive to transport grains. Grain transport costs
have always worked to
So far, world feed grain
prices have increased with those of the United States because this country
still dominates world feed grain markets, and this has caused pork production
costs in competitor countries to rise as well. However, as the
Corn imports likely would
come into Eastern seaboard ports of the
Another concern has to do
with the regional corn basis. (See the map of
Another issue is pork
production jobs versus ethanol production jobs. John Lawrence at
CONCLUSION
Mr. Chairman and members
of the Committee, the
Corn Draws for Current and Planned Ethanol
Plants
Corn Balance Sheet
Dr. Robert
Wisner,
6-Month Growth in
Ethanol Plant Production Capacity
(In Millions of
Gallons a Year)
DATE IN OPERATION UNDER CONSTRUCTION TOTAL
(as of)
Jun 23,
2006
4,818
2,223
7,040
Jul 24,
2006
4,818
2,431
7,248
Aug 24,
2006
4,830
2,881
7,710
Sep 28,
2006
5,015
3,036
8,050
Oct 23,
2006
5,081
3,498
8,579
Nov 17,
2006
5,121
3,782
8,903
Dec 01,
2006
5,161
4,367
9,528
Dec 13,
2006
5,281
4,858
10,139
Dec 20,
2006
5,386
5,378
10,764
Dec 29,
2006
5,386
6,005
11,391
Change in 6 Months
568
3,782
4,351
Renewable Fuels Association.
(For a list of existing and planned plants with their capacity, go to: www.ethanolrfa.org/industry/locations/)