Worst case for ethanol is that the price of corn relative to gasoline stays high - ie, gas prices come down, corn prices do not (or go higher). This could happen later this year, what with the amount of flooded farmland out in the corn belt and the demand from China.
The ethanol profit ends at this point, and the plants go belly-up. They would no longer be producing distillers’ grains.
The market for feeds is very large and very liquid. There is some arb between corn and other grain feeds, and some arb between soybeans (protein) vs. alfalfa hay or other higher protein feed rations. But in the winter, when you want to put weight on a cow, you need a big excess metabolic energy component in your ration. There’s only so much a cow can eat in a day, and you could kill a cow in the winter by feeding it low-calorie fluff (eg, rained-on timothy grass hay) that tastes OK, but has very low metabolic energy and low fiber relative to what they need for keeping warm.
Anyway, corn and barley are about the only two grain feeds that you could feed to a cow in winter to make them *gain* weight throughout the winter, as opposed to merely stand in place. DDG’s also fall into this category of feed product. There’s a market for DDG’s. Some producers don’t like it and whine about it, but that’s in part because they were getting SUCH a great deal on corn at $2/bu. Corn used to be incredibly cheap. So damn cheap that it was hard to make a profit on corn by doing anything OTHER than feeding it to cows or pigs. If ethanol went under, the feedlots would rejoice and say “Goodie, more corn for us” and promptly resume buying corn in vast quantities. Beef and pork prices would come down a bit and we’d go on.
There would be a lot of money in the ethanol infrastructure that would be stranded capital, tho.
So, in other words, you are saying that if ethanol goes away, DDG goes away too (for the most part). And, grain would not be processed differently into other products + some sort of processed feed, possibly somewhat different than DDG. Instead, the feed market would just revert back to feed corn.
Or put yet another way, ethanol subsidies make DDG a commercially practical large scale feed source.
Correct?
Interesting.