Regional Dynamic Price Relationships Of Distillers Dried Grains In Us Feed Markets

Distillers dried grains with solubles (DDGS) is now a mainstream substitute in U.S. animal feed rations. DDGS is rich in fat and protein content and serves as a competitive feed source in livestock markets. The objective of this study is to identify dynamic price relationships among DDGS, corn, soybean meal, and livestock outputs in context of specific livestock sectors and their geographic location. Four locations associated with a predominant livestock sector are selected for analysis by measuring density and relative proportion of a livestock sector's grain consumption at the county level. A vector error correction model is applied to post-mandate weekly price data in California, Iowa, Kansas and Georgia to estimate dynamic price relationships among DDGS, corn, soybean meal, and livestock sector outputs. Results from Granger causality tests and forecast error variance decomposition show DDGS exhibits varied relationships with the commodities among the four markets. Inconsistent causal structures in the two Midwest locations reveals differences in DDGS utilization among Iowa hog and Kansas cattle markets. Price relationships appear less developed in California dairy industries while no evidence of these interactions is discovered in Georgia poultry markets.