India's Ethanol Boom Cuts Feed Costs but Adds Pressure on Soybean Farmers

A fuel policy is changing what farm animals eat

India's ethanol expansion is creating a second market alongside fuel: millions of tonnes of cheaper animal feed. The US Department of Agriculture's New Delhi office estimated that distillers dried grains with solubles, known as DDGS, supplied 3.2 million tonnes to India's feed sector in 2024-25 and forecast 4.2 million tonnes for 2025-26. India publishes no national production series for this increasingly influential commodity.

The change reaches from distilleries to poultry farms, dairy producers and soybean growers. Grain distilleries turn starch into ethanol, leaving material containing concentrated protein, fats and minerals. Once processed into DDGS, that material competes with soybean meal, the protein ingredient left after oil is extracted from soybeans.

Prices explain the attraction. Figures shared by the Trade Promotion Council of India put soybean meal at Rs 55-59 per kilogram, rice DDGS at Rs 25-29 and maize DDGS at Rs 12.5-15.5. Feed manufacturers can reduce ingredient costs, although the products have different nutritional properties and cannot simply be exchanged kilogram for kilogram.

Soybean farmers face a different calculation. The Agriculture Ministry recorded government purchases of 779,000 tonnes of soybean under price support in 2025-26, worth Rs 4,150 crore. Such purchases operate when market prices fall below the minimum support price, or MSP.

India is therefore supporting several connected objectives: producing more ethanol, making livestock feed cheaper and encouraging domestic oilseed production. DDGS links those objectives through prices, yet the public data needed to measure that connection remain incomplete. Potential imports from the United States add another source of competition to a market already expanding through domestic ethanol production.

Grain has become the engine of ethanol growth

Nearly three quarters of India's ethanol now comes from grain, mainly maize, according to a Press Information Bureau backgrounder dated August 26, 2026. The share of sugar diverted to ethanol fell from about 12 per cent in 2022-23 to about 9 per cent in 2025-26.

Ethanol procurement rose from about 380 million litres in 2013-14 to a projected total exceeding 12 billion litres in 2025-26, more than 31 times the earlier volume. Installed production capacity reached about 20 billion litres in 2026. Capacity measures what plants could produce, while procurement measures purchases.

The government also allocated 5.2 million tonnes of surplus Food Corporation of India rice to distilleries across the 2024-25 and 2025-26 supply years. A Food Ministry reply in the Lok Sabha on July 29, 2026, put maize production for 2025-26 at 55 million tonnes.

Rice stocks help explain the policy's appeal. USDA, citing official data, put government rice holdings at 73.9 million tonnes on March 1, 2026, compared with a prescribed peak buffer of 13.58 million tonnes. Holdings were about 5.4 times that benchmark. Sending some surplus grain to distilleries creates an outlet for stocks while producing both fuel and feed.

Why feed buyers are switching ingredients

Soybean meal contains about 45-48 per cent protein, according to the Trade Promotion Council of India's figures. Rice DDGS contains 45-50 per cent, while maize DDGS contains 28-32 per cent. Rice DDGS therefore offers a broadly comparable protein percentage at roughly half the quoted soybean meal price.

Maize DDGS is cheaper still, but its lower protein concentration changes how much can be used in a feed recipe. Feed manufacturers must balance protein, energy and other nutrients for the animal being raised. A low purchase price is only one part of that calculation.

Suresh Deora, former chairman of the Compound Livestock Feed Manufacturers' Association, described the commercial appeal:

DDGS is emerging as a cost-effective domestic alternative to soybean meal, helping feed manufacturers diversify sourcing and manage raw material costs. Its growing availability alongside ethanol production can strengthen India's animal feed supply chain.

Livestock is a substantial part of the economy affected by these decisions. The Economic Survey 2025-26 recorded growth of nearly 195 per cent in livestock gross value added between FY15 and FY24. Gross value added measures the value a sector produces after subtracting the goods and services it uses. Lower feed bills can help producers manage costs in this expanding sector.

Substitution has limits, and quality matters

Industry estimates suggest organised feed mills have replaced about 25 per cent of their traditional soybean meal use with DDGS, displacing an estimated 1.2 million to 1.5 million tonnes annually. Grain Ethanol Manufacturers Association president CK Jain gave a broader estimate of 10-15 per cent substitution in animal feed formulations, reflecting a different measure of adoption.

Jain estimated annual domestic DDGS production at 3.5 million to 4 million tonnes, with exports of 600,000-700,000 tonnes. His figures cover production and exports, whereas USDA's figures describe supply to India's feed sector.

Reported substitution rates vary by animal. Poultry feed makers replace around 10-20 per cent of soybean meal in broiler and layer rations. Industry estimates put replacement of soybean meal or oil cakes in dairy concentrate feed at 30-50 per cent, and replacement of soy protein in aquaculture at 15-25 per cent. For fish and shrimp, estimated savings reach 8-12 per cent in feed costs per kilogram of weight gain.

Jayen Mehta, managing director of the Gujarat Cooperative Milk Marketing Federation, offered a more restrained assessment, saying DDGS has very limited applicability in Indian dairy feed formulations, regardless of price or availability. Different feed recipes and animal requirements help explain why adoption is uneven.

Ricky Thaper, joint secretary of the Poultry Federation of India, called for testing of every batch and disclosure of results to buyers:

Every batch of DDGS must be tested, and the test report should be shared with the buyer. This is important to build confidence among buyers,

Thaper also stressed consistent quality because feed formulations cannot be changed frequently. For buyers, reliable composition matters alongside price.

Soybean growers face weaker demand for meal

USDA's April 2025 oilseeds report estimated soybean meal use in Indian feed at 6.7 million tonnes in 2023-24 and forecast 6.15 million tonnes for 2025-26. Across those years, its DDGS use figures rose from 1.34 million to 2.57 million tonnes. The report attributed the expected soybean meal decline to cheaper DDGS availability.

Later USDA estimates issued in September put domestic soybean meal consumption for 2025-26 at 6.75 million tonnes, above the earlier forecast. They put production at 7.86 million tonnes, down from 8.7 million in 2024-25, with a further decline to 7.02 million projected for 2026-27. Exports were estimated at 1.24 million tonnes in 2025-26 and around 1 million the following year.

Crop areas show the competing incentives facing farmers. Final kharif sowing data for 2025 put maize at 9.861 million hectares, about 22 per cent above the five year normal of 8.077 million hectares. Soybean covered 12.386 million hectares, about 4 per cent below its normal of 12.871 million hectares.

The Agriculture Ministry's July 28, 2026, parliamentary reply recorded soybean support purchases at an MSP of Rs 5,328 per quintal. A quintal is 100 kilograms. Government procurement gives eligible farmers a buyer when market prices fall below that floor.

Soybean growers also face changing global meal prices, monsoon conditions and edible oil duties. In September 2026, India reduced the basic customs duty on crude soybean oil from 10 per cent to 5 per cent. Without a domestic DDGS price and production series, the separate contribution of each factor to soybean returns remains unmeasured.

The US trade opening adds another supply question

The India-US joint statement of February 7, 2026, committed India to eliminate or reduce tariffs on US DDGS among other agricultural goods. The Commerce Ministry said the concession would cover only non-LMO DDGS, in limited quantities and with partial tariff reductions, with the aim of avoiding harm to domestic feed crops.

LMO means living modified organism, a regulatory term associated with genetic modification. USDA's December 2025 biotechnology report said applications to import DDGS made from genetically modified maize had been pending with India's Genetic Engineering Appraisal Committee since 2015. The final import volume, tariff schedule and implementation date were not specified in the information announced.

CLFMA said feed DDGS imports attracted a 15 per cent duty. Its chairman, Divya Kumar Gulati, expected limited effects on soybean and little effect on maize:

Corn will not get impacted, while soy may be a little affected because we cannot 100 per cent replace soymeal,

Gulati said soybean meal's nutritional profile suited broilers and layers. Rahul Chouhan of Igrain India expressed greater concern about additional supply, describing the domestic DDGS market as comfortable and recommending imports of only around 100,000-200,000 tonnes. Higher volumes, he said, could affect maize, soybean and rapeseed prices.

Import costs may limit the pressure

US DDGS for April-May shipment was quoted at about $250 per tonne free on board, with estimated landed costs of Rs 27,500 per tonne after shipping and container expenses. Free on board means the quoted price covers delivery onto the vessel at the exporting port; the buyer still faces the cost of bringing it to India.

The estimated landed price equals Rs 27.50 per kilogram. Against the Trade Promotion Council of India's domestic quotes, it falls within the Rs 25-29 range for rice DDGS and above the Rs 12.5-15.5 range for maize DDGS. Product quality, timing and delivery terms would affect any purchasing decision, but these figures show why tariff concessions alone may not guarantee large imports.

Chouhan described declines in crop prices following the trade announcement. Soybean in Devas and Latur fell from Rs 5,750-5,900 per quintal on the preceding Friday to Rs 5,560-5,600 on Monday. He also cited Delhi maize falling from around Rs 2,100 to Rs 1,980 per quintal and rapeseed easing from Rs 6,960 on February 4 to Rs 6,820 on Monday.

Feed buyers and crop sellers therefore have different interests in the same trade decision. Buyers gain another possible supplier, while farmers and domestic distilleries face competition whose scale will depend on the final rules and delivered prices.

Parliament's question reaches beyond fuel supply

Two MPs asked the Food Ministry on July 29, 2026, whether it had assessed how ethanol demand affected maize and cattle feed prices. The reply described no such assessment. It said maize output was sufficient for ethanol production, poultry and cattle feed, without discussing DDGS or soybean meal.

The economic chain crosses government responsibilities. Ethanol demand supports grain purchases; distilleries produce feed ingredients; cheaper feed changes demand for oilseed meal; and oilseed returns influence planting decisions. Soybeans yield both meal and edible oil, so weaker demand for one product can affect the economics of producing the other.

The National Mission on Edible Oils-Oilseeds targets 25.45 million tonnes of domestic edible oil production by 2030-31. Domestic production met 43.74 per cent of India's edible oil demand in 2023-24, leaving 56.26 per cent to be met from elsewhere. Maintaining incentives for oilseed cultivation matters to that target, even as cheaper DDGS benefits livestock producers.

How the policy and market changes unfolded

India's feed shift has developed through several linked decisions and market changes rather than one announcement. The main milestones show how fuel, trade and farm support have become connected:

• 2013-14: Ethanol procurement stood at about 380 million litres.
• 2024-25 and 2025-26: The government allocated 5.2 million tonnes of surplus rice to distilleries across the two supply years.
• February 7, 2026: The India-US joint statement included tariff concessions on DDGS.
• July 28-29, 2026: Parliamentary replies recorded soybean support purchases and addressed maize availability for ethanol and feed.
• August 26, 2026: A PIB backgrounder put grain's share of ethanol production at nearly three quarters.
• September 2026: India cut the basic customs duty on crude soybean oil to 5 per cent.
• 2030-31: The edible oils mission targets domestic production of 25.45 million tonnes.

Feed manufacturers are already adapting their purchases to the cheaper ingredient. Farmers are responding to crop prices, while the government buys soybean under price support and directs surplus rice toward ethanol. Measuring those markets together would make the costs and benefits of each decision easier to judge.

Key Points

• Grain now supplies nearly three quarters of India's ethanol, expanding production of DDGS animal feed.
• USDA forecast DDGS supply to India's feed sector at 4.2 million tonnes in 2025-26.
• DDGS costs less than soybean meal, but nutritional differences and quality constrain replacement.
• India bought 779,000 tonnes of soybean under price support in 2025-26.
• Proposed US concessions cover limited quantities of non-LMO DDGS and partial tariff cuts.
• India lacks a national DDGS production series to track the connection between fuel policy, feed prices and oilseed returns.