The impact of maize-based ethanol production on the competitiveness of the South African animal feed industry

Over the past few years the world has witnessed substantial developments in the global production and the production capacity of ethanol. This tremendous growth in the industry is mainly driven by the following: petroleum prices, the reliability of traditional crude oil exporters along with political motives, adverse pollution effects and more specifically, emission gases from fossil fuels. Together with this growth, various researchers locally and globally have focused on ethanol production, but little work has been done on the economic impact that ethanol production will have on the animal feed industry. In order to simulate the results, the two main scenarios were analysed using two different models – namely, the BFAP model and the APR model. By applying the BFAP model to these scenarios, the equilibrium prices of animal feed raw materials were simulated for the year 2015. The APR model was then applied to these prices in order to evaluate the impact of ethanol production on the animal feed industry. Two main scenarios are constructed with four combinations; the main variables in the scenarios are the oil price and the blending ratios of biofuel. The results revealed that there is no significant effect on the animal feed industry. Various raw materials are affected, but only by small percentages. The only raw material that shows any significant change is lucerne, with a 20 per cent decrease in consumption. The greatest effect is the replacement of imported protein raw materials by DDGS (dried distillers grains with solubles). In terms of the animal feed costs, there was only a 2 per cent decrease with the introduction of ethanol production. Under a scenario of high blending ratios and oil prices, the yellow maize price increases by R169/ton and the soya oilcake price decreases by R347/ton.