The trade war is causing U.S. ethanol production to decline, thus raising the costs of distillers dried grains, a byproduct of the ethanol process that is used for animal feed. Reuters reports cuts to ethanol production are tightening supplies of DDGs and raising prices paid by livestock farmers. Many are turning to other feeds including soybean meal, the price of which eased as China halted imports of American soybeans.
The shift in distillers’ grain demand is causing further harm to the ethanol industry, which is facing the lowest ethanol prices in over a decade. Distillers’ grains have previously helped the struggling sector by providing solid demand for the byproduct, but that support is eroding as production is being limited. Ethanol makers were forced to limit production rates over the last year due to the low price, in an effort to deal with negative profit margins. The shift to soybean meal from DDGs is largely seen in the hog sector. Meanwhile, China, the top importer of U.S. DDGs, stopped buying the product last year due to the trade war.
Source: NAFB News Service