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Counting the Costs of Stored Co-products

24 June 2008

US - A new University of Nebraska-Lincoln Extension designed spreadsheet can help producers better calculate the costs of storing wet distillers grains or other co-products on-site.

Prices of ethanol co-products, such as wet distillers grains, seasonally are at their lowest during summer months. Co-Product STORE (Storage To Optimize Ration Expenses) allows producers to analyze and evaluate specific storage scenarios to take advantage of seasonal price lows, said Josie Waterbury, UNL graduate research assistant, who designed the spreadsheet along with UNL livestock marketing specialist Darrell Mark and animal scientists Rick Rasby and Galen Erickson.

Producers then can store the co-product and feed it at a later date.

"This tool will allow producers to quantify the costs of storage and help producers identify and refine the optimal storage strategy for their operation," Waterbury said. "It will not only allow them to know whether to purchase large quantities to store in the summer and take advantage of the price, but doing so also can be used as a natural procurement hedge because by physically owning the commodity, cattle feeders and ranchers are protected against the risk of being able to obtain the co-product at any price level at a later date."


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"This tool will allow producers to quantify the costs of storage and help producers identify and refine the optimal storage strategy"
Josie Waterbury, UNL graduate research assistant

Co-product storage also is particularly convenient for many cow-calf operations and smaller feedlots that are unable to use an entire truck-load of co-products at one time, Rasby said.

Previous university animal science research found ethanol co-products are excellent feedstuffs for feedlot cattle. In addition, research shows wet distillers grains will not spoil over an extended period of time if oxygen is eliminated. Adding minimal amounts of dry, bulky feedstuffs to wet distillers grains also solves that problem, Erickson said.

While research has been conducted exploring methods to store co-products and the effects they have on cattle, little was done on evaluating the economics of storing co-products for extended periods of time, Mark said.

Co-product STORE can help producers determine if the total storage cost is cheaper than what would be paid for the co-product at a later time without storage, Mark said.

Co-product STORE is available at the UNL Beef Web site. For more information on storage techniques, a manual also is available on the UNL Beef Web site called "Storage of Wet Corn Co-Products."

The ethanol industry's rapid growth has created a new commodity market for ethanol co-products, Mark said. The variability in co-product prices over time and across markets suggests fundamental supply and demand factors are influencing prices.

However, the infancy of the co-product markets presents cattle producers with the opportunity to benefit from seasonal price changes.

The spreadsheet is organized into four, user-friendly steps that allow producers to define costs and include parameters that represent their own operations, Waterbury said.

Producers will need to input several parameters unique to their situation in the spreadsheet to calculate their costs, including co-product material and transportation quantities and prices, storage and feeding dates, estimated shrink, and equipment, labor and interest costs.

After producers fill in these four steps, results are summarized. Results will vary from operation to operation.

TheCattleSite News Desk


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