More and more corn ethanol plants in the U.S. are installing equipment to produce non-food grade oil, which positively impacts the bottom line of ethanol operations.

The first byproduct of ethanol has always been distiller’s dried grains with solubles (DDGS). While regular DDGS may contain 10 percent to15 percent oil, the low-oil variety contains much less and has different characteristics and feeding values than regular DDGS. The U.S. Grains Council says research is underway to help quantify the characteristics of low-oil DDGS. Results will become available later in 2012.

“Of the roughly 200 corn dry mills that produce ethanol, about 90 have oil extraction capabilities, and 105 plants will by this summer,” the Council reports.

“On a production basis, about 40 percent of U.S. DDGS produced today is low-oil, and 58 percent will be low-oil by this summer,” said Randy Ives of Gavilon, LLC, and U.S. Grains Council Value-Added Advisory Team leader.

The Council says while buyers and sellers often add the protein and fat numbers together as part of a sales contract that may need to change going forward. It’s expected that a new discount schedule to make up for slight differences in the final DDGS shipment will be needed.

“Just five years ago, few ethanol plants had the ability to extract non-food grade corn oil because the equipment was expensive, and the oil had little value. Now, however, the value of non-food grade corn oil has increased, and plants can extract the oil more efficiently due to improved emulsifiers and centrifuge technology, lowering the payback on oil extraction equipment to as little as six months,” explained the Council.

For example, an ethanol plant using 16 million bushels of corn to produce 40 million gallons of ethanol can also produce 135,000 tons of low-oil DDGS and 8 to 12 million pounds of oil.

“With such a positive return, the adoption rate has been incredible,” Ives said.