New Pellet Plant Aims For Global Markets

An inside look at the newly-opened Dakota Protein LLC operation shows part of the production process which turns dried distillers grains (DDG), an ethanol by-product, into pellets for livestock feed. For videos, visit www.yankton.net.

Dakota Protein LLC manager Matt Winsand wanted to give visitors a taste of the product made at the new $15 million pelleting plant near Napa Junction northwest of Yankton.

He handed a pellet of livestock feed — made of the ethanol by-product known as dried distiller’s grain (DDG) — to the Press & Dakotan staffers touring the $15 million facility.

“Here, try one. You can bite off a corner instead of the whole thing — just don’t break a tooth,” he said with a laugh, then ate one of the crunchy morsels.

The P&D staff members, or any other persons, aren’t the target market for the corn-tasting feed. However, Winsand made his point, noting the pellets’ high quality, nutritional value and ability to stay in a solid form.

And with the roar of production under way, Winsand and six other investors — three from South Dakota and three from Missouri, who he declined to identify — are setting their sights on a global scale.

“We’re working on a worldwide market,” he said. “We’ve been in talks with a dairy association in India for their export markets.”

In addition, Mexico is the largest importer of DDG, possibly offering a lucrative market for the pellet just south of the border, Winsand said.

Winsand remains CEO/manager of the neighboring Dakota Plains Ag facility. While he’s part of both facilities, he emphasized the Dakota Plains and Dakota Protein operations are separate and don’t affect each other.

The Dakota Protein pellets are geared primarily for cattle and other livestock, but they can be made for other animals as well, he said.

UP AND RUNNING

For now, Winsand has worked on getting Dakota Protein production started and finalizing plans to run a rail spur through the site for better transportation. The work isn’t finished, as the investors are already planning a $5 million expansion later this year.

“It took 1½ years to get this all up and running,” he said. “We’ve been in operation for two weeks now. We’re hoping to get the rail spur going within the next week.”

The $20 million project consists of $10 million each for the facility and the equipment, Winsand said. The building covers 100 feet wide by 460 feet long, with 45-foot sidewalls and 58 feet — more than three stories — from the floor to the peak.

Winsand shared statistics about the current and potential production.

Each extruder can process four tons of DDG per hour. The operation currently has two extruders but has room for 12 of the machines along with an expanded number of storage units.

The room for adding machinery and storage containers reflects the owners’ optimism about the future. The venture has hired 13 employees so far, who have received training on the specialized equipment.

“We run 24/7, shutting down only for cleaning the machinery. It takes about 16 hours to clean an extruder,” he said. “Our equipment is unique to the industry. Not everyone has the equipment we have. We have a couple of plants around the U.S. doing this (same process).”

Winsand has invested a great deal of research and effort into creating the extruder. The result: a higher-quality pellet that takes less volume for shipping, he said.

“I’ve spent a lot of time in this world trying to make good DDG pellets. It’s not an easy science,” he said. “A lot of people are making DDG pellets. I always say, if you toss a pellet to the ground and it’s covered with DDG, then you’re not doing something right.”

The Dakota Protein business model takes into account the fluctuations in DDG supply and market price throughout the year. ‘We price our products $100 a ton above what we paid on average for the week,” he said.

The quality of the final pellet starts with the right input at the start, Winsand said.

“These pellets are a 100 percent DDG product. We’re buying DDG from all the area (ethanol) plants,” he said. “We’re doing some testing now to see what products work the best. We’re learning the when, where and why. We’re picking out the one or two companies with the better product.”

Dakota Protein has contacted ethanol plants in Marion and Aurora, in South Dakota; Jackson, Norfolk and Plainvew, Nebraska; and Merrill and Marcus, Iowa.

“The ethanol plant takes all the starch out of the corn kernels and leaves the fiber, oil, fat and protein as DDG,” he said. “But not all DDG is created equal, even from the same plant on the same day.”

THE RIGHT INGREDIENTS

Dakota Protein starts with its own standards for the DDG it wants to accept, Winsand said.

“As far as testing, we are looking at the quality of the product. We want to see DDG that comes in at 28 percent protein, 10 to 15 percent fiber content and 7 percent fat ratio. Those are the main ones; those are the feed ratios that everyone is looking for,” he said.

“When we finished our extrusion process, we tested the pellets and they came in at 9.5 percent fat and 31.6 percent protein. It increased in quality because of our extrusion process. It’s still 100 percent DDG, but we’re turning it into a different product in terms of the quality and percentages. That’s the neat part about the whole process — the extrusion and testing.”

Winsand held up a handful of pellet, showing the firm shape that can be adjusted to the customers’ needs by using different die. He likened it to the small toy sets that created different shapes of Play Dough rolling out the different tubes and forms.

Winsand admitted some glitches in the early batches. He showed a pile of loose DDG that resulted from an early run, but he said there was little to no waste with the follow-up production.

Livestock producers and other customers benefit from that type of tight pellets, he said.

“We’re seeing farmers buying a ton of loose DDG. What we’re seeing over time, between the wind, elements and animals, you’re losing 25 percent and as high as 40 percent of that product. It’s just gone. People don’t want their product blowing away in the wind.”

Winsand held pellets in his hand, showing the 100 percent DDG content with some oily texture on the outside of the pellet. Other forms of production may not bind the DDG together and may require some kind of binder that doesn’t produce 100 percent DDG, he said.

“We can make a 7/8 (inch) cube, which is a funny name because it’s not a cube — it’s a round pellet,” he said. “If it falls on the ground, it won’t fall apart or blow away, so your animal can find it. That’s important whether you have a small farm or a large ranch where your livestock roam the range. Some people even call the 7/8 cube a range cake.”

The compressed pellets create greater efficiency when it comes to major shipments, Winsand said. The pellets’ smaller volume means more can be moved by any mode of transportation.

“With the way DDGs are exported now, there isn’t enough in the way of freight to pay for the shipping,” he said. “With the loose DDGs, there is 30 to 40 percent of the freight that you’re eating because it’s loose. With the pellets, you can fill up the shipment.”

READY FOR ANY MARKET

Dakota Protein will service any customer, from major companies and international trade who rely on rail shipments to the local producer who wants to fill a pick-up.

“My wife raises goats and likes (feeding them) the small pellets,” Winsand said.

Winsand is keeping an eye on the ethanol industry. He wants to see the area plants remain strong not only for his own operation but for agriculture in general.

“The ethanol market isn’t good right now. We’re really waiting for E-15 to come full circle. We need it to come full circle,” he said. “A lot of ethanol plants have ratcheted down or even stopped production. They don’t have the export markets, particularly with China. A 73 percent tariff rate doesn’t allow us to export our products.”

Winsand talked with a colleague who said enough states need to adopt E-15 gasoline — a mix including 15 percent ethanol — to equal E-11 on a national average.

“It would go a long way to getting us back to full throttle with everyone up and running (in the ethanol industry). It would be more efficient at that level, and it would be a big help,” he said. “It’s easy to find E-15, E-20, E-30 and E-85 in the Midwest. But once you hit the East Coast and West Coast, it’s much harder to find those blends.”

The current 10 percent blend for ethanol requires 17 billion gallons of production to meet the demand. With a 15 percent blend, the ethanol demand rises to 21 billion gallons.

“That’s why reaching E-15 is so important. Everyone would be running efficiently, and we may even create a few new ethanol plants,” he said. “It would make up the difference in not getting shipments to China (under the current trade war).”

Despite such ups and down, Winsand said the Dakota Protein investors believe they are entering an important and profitable area not only locally but also globally.

Winsand sees it as investing in the farmers all around him and possibly from long distances.

“This is a prime example of value-added agriculture,” he said. “I’m optimistic about the future.”

Follow @RDockendorf on Twitter.

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