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Feed demands and coproduct substitution in the biofuel era

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Abstract

The use of traditional feedstocks for biofuel production has brought about large changes to food and agricultural systems. As livestock producers adapt to rising feed costs, the prospect of incorporating dried distiller's grain with solubles (DDGS) at higher than traditional levels becomes an important consideration. Given prices for feedstuffs and supplies of DDGS that are outside the historical data range, forward-looking analyses of the agricultural economy (even those with explicit derived demands for livestock feed) are poorly equipped to represent the farm- and sector-level tradeoffs that will emerge. The authors' results indicate that DDGS demands are more responsive to price changes in energy-oriented feeds than protein, despite the predominant historic feeding use of DDGS as a protein supplement. They extend their empirical analysis to account for the role of heterogeneous DDGS feed quality, identifying this as a critical consideration for sector-level substitution patterns. The price elasticities they report from their two-stage farm-level feed mix simulation and sector-level cost function estimation offer a robust picture of feedstuffs substitution of the type necessary for understanding the livestock component of demand response in the biofuels era. [EconLit citations: D20; C61; C13]. © 2010 Wiley Periodicals, Inc.

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