Distillery by-products, livestock feed and bio-energy use: report

6. Distillery by-product price, availability and livestock feed trends in Scotland

Feed value of distillery by-products

46. Given nutritional information on distillery by-products (as detailed in Appendix 3) it is possible to determine the financial value of different feeds relative to one another. For ruminants the dominant feeds used by SRUC to set the base line are barley as an energy source and rapeseed meal as a protein source. Table 13 contains relative feed values for distillery by-products which are also compared to market prices for the different feeds in October 2018.

Table 13. Relative nutritional and financial values for distillery by-products versus other feeds for use in cattle feeding

Feed	Relative Feed Value (£/t)	Average market values* for feeds (£/t),	Difference with RFV (£/t)	>Difference with RFV (%)
Brewers grains or draff (23% DM)	47	45	- 2.00	-4.3
Wheat Distiller’s Dark Grains	269	270	1.00	0.4
Pot Ale Syrup (PAS)	144	77	-67	-46.53
Base (i) – barley	189	189	0	0
Base (ii) - rape-meal	259	259	0	0

Notes
Relative Feed Value (RFV)
Average Market values for Feeds

Source
SAC Feed Byte October 2018
Scotland delivered values October 2018

Explanation – a ruminant feed ration could be prepared using barley and rape-meal. Alternatively the nutritional requirements of the animal could be met with other feeds. The Relative Feed Value is an indication of the maximum equivalent monetary value that the producer should be prepared to pay for these alternative feeds to deliver feed of a comparable nutritional status and costs to using barley and rape-meal

47. Table 13 illustrates that at recent market values the competitiveness of distillery by-products relative to other comparable feeds varies as follows; draff is 4% cheaper, Pot Ale Syrup (PAS) is 47% cheaper, while wheat distiller’s dark grains is 0.4% more expensive. Price spreads indicate that distiller’s dark grains are currently close to competitive with alternative feeds of equivalent nutritional value. However, there is low availability for both draff and PAS, the majority of draff is on contract. It is worth noting that in some remote areas on the islands with a distillery, draff is being sold at £21/t, however, this is only in localised areas. Based on the Relative Feed Value (RFV) in Table 13 draff in these areas is 55% cheaper than its Relative Feed Values suggests. In addition, feed costs are higher in remote areas and the islands and if these values were used in the relative feed calculations this would make draff even better value.

48. The apparently low value of pot-ale reflects the difficulties end users face in transporting, handling and storage due to its high water content. Livestock producers often need purpose designed feeders and handling systems to manage it effectively and not all producers are prepared to use it.

Historic price trends

49. The price of distillery by-products varies significantly across the season in response to local supply and demand issues (see Figure 4. overleaf). The most pronounced price swings are seen in draff due to the high cost of transport, difficulties in storage and the seasonal nature of production and demand. In the vicinity of distilleries in the more remote locations in the Highlands and Islands the price of draff can range between £20 and £40 per tonne delivered farm within a season. In the main agricultural regions in the east, south and south west draff prices are more stable typically in the £30 to £40/t delivered farm range in recent year and respond more to relative pricing of alternative feeds. Feed demand is higher in the winter and early spring and then declines as grass growth resumes in late spring. This can lead to an oversupply of distillery by-products in early summer and lower prices.

50. Dried by-product prices are more stable reflecting their ease of storage and greater portability enabling supply to a wider area. Price swings are mainly influenced by the global price of competing feeds and grain crops on the European and global markets particularly soya-meal and rape-meal.

Figure 4. Monthly feed prices, delivered Scotland

Source: SRUC and trade sources.

Table 14. Feed and distillery by-product price ranges 2012-2018

Price range	£ per tonne delivered
	Soyameal (Hi Pro)	Rapemeal	Wheat Distiller’s	Draff
Mean	349.29	226.54	226.78	26.99
Median	345.75	218.00	212.75	27.00
High	463.00	303.00	304.00	49.00
Low	261.00	167.00	181.00	10.50

Source: SRUC and trade sources.

51. To consider how the relative price of distillery by-products has changed since 2012, SRUC has compared historic prices with a base period of January 2012 in Figure 5 below. What is clear is that draff prices weakened significantly more than other protein feeds in the period between 2014 and 2016 suggesting oversupply. Since then draff prices have recovered to their earlier higher levels suggesting greater competition for their use. These prices reflect the increasing difficulty livestock farmers have faced in securing the same quantities of draff that they have traditionally done. These prices also support the estimates of decreased draff availability detailed in Sections 2 and 3. From a period of relative oversupply in the period 2014-2016, it appears that supplies of draff are now more restricted and prices have risen as a result.

Figure 5 – Changes in the price of individual feeds relative to their value in 2012 (2012=100)

Source: SRUC and trade sources.

Distillery by-products feed usage patterns in Scotland

52. The experience of SRUC consultants is that many beef and dairy farms in Scotland will utilise distillery by-products whenever they are priced competitively. The decline in availability in recent years has tended to increase the price of distillery by-products relative to alternatives and has encouraged changes in feeding practices. Distillery by-products are a significant source of energy but are a more important protein source due to their typically high protein content. The pattern of use varies widely by farm type and geographical area:

Draff and grain moist feeds – are widely used in the feeding of suckler cows and store cattle are often mixed with silage and stored in clamps for winter feeding. Use of draff has declined on many beef units due to reduction in availability and higher prices. As by-product prices have risen it is reported that dairy farms have taken an increasing share of what is available due to their higher ability (or willingness) to pay closer to their relative energy and protein value for feed. Dairy farms including those in the South West use draff and grain moist feeds on a regular basis. Usage of draff is more common in the north and north east of Scotland due to greater availability, lower pricing and generally closer proximity to distilleries. Despite higher prices usage of draff remains important across the south of Scotland with use restricted more by shortage of supply than the level of demand for these feeds.

Pot ale syrup – is a particularly good value feed at present but its usage is less widespread on farm due to difficulties in handling and storage. Farmers are currently taking greater interest in the feeding of pot ale syrup as a good value feed but availability is reported as limited or not available.

Distiller’s Dark Grains – these are widely used in the finishing of beef cattle as a protein source added to barley. They are also regularly used in a range of compound and straight feeds for all types of cattle. The closure of the last barley dark grains plant in early 2018 means that only wheat or maize distiller’s grains are now available.

Farmer’s response to reduced distillery feed availability

53. The following comments are based on feedback from SRUC nutritionists, farmers and feed industry contacts.

Feed replacement for Scotch whisky distiller’s draff/DDGS

54. Until recently any shortfall in Scotch whisky draff and distiller’s grains availability in Scotland was being met in part by distiller’s grains from the bio-ethanol plants in the north of England. This production from England has been more significant to livestock producers in the south of Scotland due to proximity and transport costs benefits. Further north in Scotland accessing these feeds has been more expensive due to additional transport costs. Given the recent closures and extended maintenance period of the two main English bio-ethanol plants, supplies of these feeds has fallen sharply. As a result overseas imported distiller’s grains have become increasingly competitive, first from continental European plants, but now increasingly from the large US bio-ethanol industry.

Changes in on-farm feed and forage production

55. As draff has become less available in some areas of the country farmers have looked to increase the supply of home-grown alternatives. Improvements in silage have been notable, particularly in the dairy sector where steady improvements in silage quality have been achieved. More farmers are now adopting multi-cut systems where the focus is more on quality as the majority move to earlier cutting dates. Multi-cut systems involve a reduction in the time between silage cuts down to 4 or 5 weeks. Multi-cut systems produce silage with a higher energy density (Metabolisable Energy) and higher Crude Protein levels which is particularly beneficial in dairy production or beef finishing.

56. This has also been a strong message carried over to the sheep sector, with many farmers now starting to feed just high quality silage and soya to their ewes throughout pregnancy, providing a huge cost saving. A high quality silage is that of 11+ MJ ME/kg DM. In a similar way to dairy this has been achieved by earlier cutting and management of grassland through reseeding, liming etc.

57. Weather conditions have a large effect on both quality and quantity of silage. In 2017/18 there was a shortage of silage cut due to wet conditions at harvest. In 2018/19 there was a concern of there being a shortage of forage due to the drought like conditions, however when rain did come there was a late flush of grass and farmers were able to get another cut of grass. This may have given the bulk farmers require but will be of lower quality (lower energy, higher fibre) due to the delay in cutting. This compounds the issue as draff would have eased the pressure on forage stocks.

Farmer’s ability to meet the year round output of distillery by-products

58. Traditionally the whisky sector has faced issues in finding a market for draff produced during the summer months as cattle were out at grass. This has been more of a problem historically and there are reasons to that this has become less of a concern. The reduction in the surplus of distillery by-products has increased the capacity of farmers to accept what is available. The higher price of distillery by-products has concentrated their use with the more intensive livestock producers; particularly dairy farms. Dairy cattle have a more consistent concentrate requirement all year round and take less of their feed requirement from forage than beef herds.

59. Farmers have also adapted to taking draff in the summer if it is available (and at a lower price) and ensiling it for use in the winter. However, this practice has a significant cash-flow impact on a farm business as it involves them paying for it at that time i.e. if they are taking 100t of draff at £40/t that’s £4,000 to lay out in one go, months ahead of the feeding period.

Feed use of draff in remote locations

60. Malt whisky production has been increasingly driven by the demand for single malts particularly the premium kind. This has resulted in a growth in demand for whisky from some of the smaller and remote distilleries in the Highlands and Islands. Due to the relatively small scale of these plants, investment in Anaerobic Digestion plants is not generally economically feasible. Haulage of by-products out of the region to meet livestock feed demand in the central belt of Scotland is prohibitively expensive. At the same time livestock producers in these areas face greatly increased transport costs for bringing feed in and often a shorter growing season and increased reliance on bought in feed. For these reasons distilleries and local farmers have a lot to gain from local use of draff in feed. There are several good examples where these arrangements have grown and strengthened in recent years on several of the islands such as Skye, Orkney and remote parts of the mainland. Farmers in these areas have adapted their feeding systems including increased use of pit storage to help ensure they meet the needs of the distilleries by accepting draff all year round.