Analyzing The Economics Of High-Oil Corn

University of Nebraska researchers, recognizing current interest in the growing and feeding of high-oil corn (HOC) to pigs, recently discussed early results from a feasibility study. However, they cautioned that the information should be treated as a progress report, as more results are forthcoming.Larry Bitney, Duane Reese and Robert Caldwell wondered if there were economic benefits to growing and

University of Nebraska researchers, recognizing current interest in the growing and feeding of high-oil corn (HOC) to pigs, recently discussed early results from a feasibility study. However, they cautioned that the information should be treated as a progress report, as more results are forthcoming.

Larry Bitney, Duane Reese and Robert Caldwell wondered if there were economic benefits to growing and feeding high-oil corn to pigs in Nebraska.

The trio of researchers feel it is important that producers gain a better understanding of high-oil corn technology. And, they remind producers that the value of these enhanced grains may change as feed costs change and/or yield limitations are solved.

Understanding High-Oil Corn DuPont is the primary company involved in high-oil corn production, having licensed its high-oil corn genes to 80 seed companies. The DuPont TOPCross system is the most common method of producing commercial high-oil corn.

The same general production practices are recommended for normal corn and high-oil corn. There is a disagreement over the extent of separation needed between high-oil and normal corn to prevent cross-pollination. Estimates range from 200 ft. down to no separation requirement at all.

High-oil corn hybrids are likely to yield less than their normal counterparts. The yield loss is expected because of two factors: the physiological cost to the plant of making the oil, and the competition between the male and female parents in blended hybrids.

The researchers say, all other things being constant, a 2.5% yield reduction would be expected for every 1% increase in oil content of the corn.

Because the yield of high-oil corn compared to normal corn is uncertain, the Nebraska researchers thought it may be best to evaluate the impact of a range of yield reductions. The researchers say it appears high-oil corn will likely yield within a range of 85-100% of normal corn. That range was selected for evaluation and the results are presented in Table 1.

Because the production practices for high-oil corn and normal corn are identical (except for isolation requirements), other than the seed, the production costs per acre are the same. There is often a $30/bagtechnology fee for high-oil corn seed. This amounts to about $10/acre. If high-oil corn yields the same as normal corn, this $10/acre is the only added cost, which amounts to 6.8 cents/bu. with a 150 bu./acre yield (Table 1).

If high-oil corn yield is 90% of normal corn yield, the added production cost is 32.5 cents/bu. (this includes the 6.8 cents cost for the technology fee). The added production costs would increase slightly if seeding rate was increased by 2,000 seeds/acre. Thus, the yield of high-oil corn that producers expect is a key variable in their decision to adopt this technology.

Yield comparisons of high-oil corn to normal corn are difficult to make, due to the isolation needed for high-oil corn. A study conducted in Ohio found the average yield of high-oil varieties was 90% of the normal-corn hybrids. Two normal-corn hybrids in the Nebraska experiment had high-oil counterparts. Considering those two hybrids only, the high-oil versions averaged 92.3% of the yield of the normal-corn hybrids.

Researchers expect yields will be in the 90-93% range, given the current stage of the technology. This would result in added production costs of 25-32 cents/bu. for high-oil corn.

The storage requirements for high-oil corn are similar to those for normal corn, but it is important to store them separately if the added feeding benefit is to be realized. This separate storage may add to the cost or inconvenience.

High-oil corn processes and handles at least as well as normal corn, researchers add.

High-oil corn contains more protein, lysine, fat and metabolizable energy than normal corn (see Table 2). Because there seems to be significant genetic and environmental effects on the final nutrient content of high-oil corn, a range in composition is presented.

High-Oil Corn In Pig Diets There is a shortage of data comparing the performance of pigs fed high-oil corn (5.5-7.5% oil) to normal corn (3.5-4.2% oil). However, a large database exists regarding the effect of adding animal fat or vegetable oil to swine diets. Recent trials indicate when the total amount of fat in normal-corn-based diets is equalized to that in a high-oil-corn-based diet by fat supplementation, pig performance is similar. Using this analogy, researchers assume high-oil corn would elicit a similar response as if a similar amount of fat were added to a normal-corn-based diet.

Feed efficiency improves an average of 2% for each 1% increment of added fat to the diet. Diets containing high-oil corn contain between 1.5% and 3% added fat, depending on the oil content of the corn. Therefore, feed efficiency should improve from about 3% to 6% when high-oil corn is substituted for normal corn in the diet.

Generally when growing-finishing pigs are fed normal-corn-based diets containing 1.5-3% added vegetable oil or animal fat (an amount similar to that when high-oil corn replaces normal corn in the diet), daily gain remains constant. Daily gain may increase up to about 3% in some cases, especially during hot weather. Thus, until further data from high-oil corn feeding trials is available, the Nebraska researchers suggest that average daily gain will remain the same, but may improve up to 3% when high-oil corn replaces normal corn in growing-finishing pig diets.

Backfat thickness should not be altered when using high-oil corn in the diet, unless the additional fat levels exceed 5% of the diet and the amino acid-to-calorie ratio in the diet is not maintained at a constant level.

Growing pigs weighing from about 30-130 lb., and lactating sows would benefit the most from high-oil corn in the diet because they have the most difficulty consuming enough calories to maximize performance.

As little as 2.5% added fat (50 lb./ton) reduces dust in confinement buildings, and in feed mills, by about 25%. Reduced dust levels have improved health implications for both pigs and people.

Bitney, Reese and Caldwell credited high-oil corn for improving feed efficiency only as part of their analysis.

There are certain instances where a producer would expect a greater response in feed efficiency than others. For example, feed efficiency and daily gain are improved more by feeding fat to pigs during hot weather than during cold. Thus, if pigs are expected to be finished during the summer, it would be better to assume feed efficiency may improve by 7% (for 7.5% high-oil corn). But during the winter, diets with the same high-oil corn may only improve feed efficiency by 5%.

Twelve diets were formulated to calculate the economic value of high-oil corn as a replacement for normal corn in growing-finishing pig diets. All diets contained 44% crude protein soybean meal as the only source of supplemental protein. Four diets were formulated with normal corn to contain 1, 0.9, 0.8 and 0.7% lysine. Four diets were formulated with 5.5% fat high-oil corn and four others with 7.5% fat high-oil corn. The high-oil corn-based diets contained the same ratio of lysine to metabolizable energy as the normal-corn based diets. An overall feed conversion rate of 3 lb. feed/lb. of gain, and an average daily gain of 1.8 lb. was assumed. Levels of 2-4% improvement in feed efficiency for 5.5% corn oil content and 5-7% improvement in feed efficiency for 7.5% corn oil content were applied to the diets. The price of normal corn was $2.50/bu., 44% soybean meal was $250/ton, and other ingredients were at current market prices. The cost savings realized from improved feed conversion was attributed to high-oil corn. Results are shown in Table 3.

Because of the high-oil corn feed efficiency advantage, the price of the major ingredients (corn, soybean meal) impact the added value of the high-oil corn. Table 3 shows a range of added values for high-oil corn reflecting high and low corn and soybean meal prices.

For example, a 5% improvement in feed efficiency means the added value of high-oil corn is 25 cents/bu. (with $2.50/bu. corn, $250/ton soybean meal). But, the high-oil corn advantage drops to 20 cents/bu. if normal corn is $2/bu. and soybean meal is $200/ton.

The average oil content of high-oil corn varieties in a Kearney, NE, Area Agricultural Producers Alliance field tests was 6.2% (12% moisture basis). Thus, feed efficiency should improve by 4-5% when fed to growing-finishing pigs. Therefore, the added value of high-oil corn is 21-25 cents when corn is $2.50/bu. and soybean meal is $250/ton.

Assuming production costs for high-oil corn would be 25-32 cents/bu. higher, the researchers conclude growing and feeding high-oil corn to pigs does not appear to be economically feasible at the current state of the technology. The conclusion is based on increased feed efficiency being the only economic benefit realized.

If pigs that are fed a diet containing high-oil corn gain 3% faster than those fed diets containing normal corn, what is the economic benefit? The effect of an increase in average daily gain is analyzed as a 'what-if' question, since the variability in feeding trial results does not produce a clear answer. In addition to uncertainty regarding any change in average daily gain, the economic value of reducing the length of the feeding period varies from producer to producer.

If producers obtain a 3% increase in average daily gain, they will likely realize an added value of high-oil corn in the 0-2 cents/bu. range (see Table 4). While an improvement in average daily gain is possible, it is doubtful that most producers are able to derive a significant economic benefit, according to Reese.

Producers who currently add fat to their pig diets can substitute high-oil corn for normal corn to achieve the higher dietary fat levels.

What is the economic value of high-oil corn when it is used to replace added fat (animal or vegetable) and normal corn in pig diets? Researchers attempted to answer this question by formulating diets with normal corn and fat to contain the same metabolizable energy, lysine and fat level as diets with high-oil corn containing 7.5% oil. Diets were formulated in the same manner as previously described. Prices of $2.50/bu. for normal corn and $250/ton for 44% soybean meal were used. Fat pricesof 10, 20, 30 and 40 cents/lb. were used in the analysis. The economic value of high-oil corn, compared to normal corn was calculated.

The added values, or premiums, for high-oil corn, when used to replace added fat (Table 5) are much greater than those when it was substituted for normal corn (Table 4). A fat price of 20 cents/lb. results in a 44 cents/bu. premium for high-oil corn. This is clearly above the 25-32 cents/bu. increase in production cost. Vegetable oils, which may cost 40 cents/lb. result in an 89 cents/bu. premium for high-oil corn.

Producers should use caution when interpreting the premiums for high-oil corn in Table 5. It is assumed the producer can justify purchasing fat at 20 cents/lb. to supplement a diet, for example. Therefore, if high-oil corn can serve as a supplemental energy source in a diet for under 44 cents/bu., it will be the more economical option. Table 3 allows producers to determine quickly if high-oil corn is a more economical fat source than the one currently used. It does not imply that it is economically feasible to add fat at the prices shown, the researchers caution.