Raw Story, MA
09-25-07
Soaring corn prices hit US cattle farmers
America's drive for alternative sources of energy is proving an expensive
challenge for cattle farmers who are struggling to pay for traditional feed as the
price of corn soars.
Corn has traditionally made up 40 percent of the diet of cattle at the Agri Beef
Company in Idaho, but earlier this year the firm decided to cease relying on the
grain after the price per bushel doubled.
The price rises have been driven by demand for homegrown corn to make
ethanol, a biofuel whose synthesis has been sweetened by federal subsidies.
The ethanol boom has helped boost the bushel price for corn at a time when the
US Department of Agriculture predicts more acres of corn than ever will be
planted in such Corn Belt states as Illinois, and when USDA projections show
commodities such as soybeans are poised to be displaced.
What is good news for grain farmers is grim news for cattle, hog and poultry
producers, who buy the majority of the nation's feed corn and have counted on
low prices to keep costs down from feedlot to food store.
They say the dual challenges of a surge in ethanol production and a strong
export demand for corn means everyone from breeders along rural byways to
consumers in urban centers will feel the pain.
"People will be paying more for cornflakes and more at the meat counter," said
Rick Stott, Agri Beef vice president.
Increasingly, cattle farmers are having to be inventive in coming up with cheaper
feed sources to corn. Agri has begun feeding its cattle with potato by-products
including tater tots, hash browns and peelings.
Registered Angus breeder Jim Skinner said soaring grain and fuel prices have
led to a 40-percent rise in expenses.
"Oh man, it's just getting where it's tough," he said.
In the cattle industry, finishing operations bear the brunt of climbing feed costs
because cows must nearly double in size before being sent to slaughter. The
feedlot owned by Simplot in southwest Idaho must fund the fattening of more
than 100,000 cattle.
Simplot's Scott McNeley said beefed up corn costs have pushed the operation's
feed bill to an all-time high.
And the inverse relationship between grain prices and the price per pound
feedlots are willing to pay means ranchers are poised to collect less profit per
calf.
Ranching consultant Bob Loucks has added his voice to the chorus of critics
claiming the government is unfairly underwriting ethanol at the expense of animal
producers, in essence pitting one agricultural sector against another.
At the same time, Loucks is a true believer that producers must possess
entrepreneurial acumen.
"If you are not a business person, you won't stay in business," said Loucks, who
ranches in Idaho's Lemhi River Valley.
He is among livestock experts who say the industry is undergoing a dramatic
shift that, in a rare twist, has been brought on by demand instead of supply. And
that demand shows no sign of slowing, according to projections by Iowa State
University economist Robert Wisner.
Wisner's model suggests that while global exports of US corn will hover at 100
million metric tons through 2016, corn earmarked for ethanol will exceed exports
by 40 million metric tons within three years.
National cattle, pork and poultry groups are advocating an energy policy that puts
an end to ethanol supports.
Eyeing dozens more ethanol plants primed to go online, the National Pork
Producers Council's David Warner said, "We're not against ethanol production
but we want a level playing field to compete for corn."
With feed behind 75 percent of the cost of raising hogs, prohibitively high corn
prices have translated into lighter weights at the slaughterhouse as operators
search for alternative grains and shorten the period pigs put on pounds.
Dave Roper, owner of Magic Valley Pork in south central Idaho, said he put the
brakes on corn buying at his 6,000-head operation six months ago and has
turned to a mix of barley, peas and soybeans.
"The biggest concern we have as livestock producers is our primary source of
feed has gone to a point where it's beginning to be noncompetitive for us to stay
in business," he said.
Livestock economist John Lawrence, director of the Iowa Beef Center at
Iowa State University, predicted the growing demand for corn and other cereal
grains such as wheat - now selling for record amounts - will inflate land-based
commodity prices in coming years.
And beef prices are likely to rise as ranchers reduce herd sizes. "I don't see us
stepping back," said Lawrence.
Simplot's McNeley said Americans unhappy with price hikes at the grocery store
must face the facts about fuel. "As a society we need to make a choice: do we
want to drive our SUVs or eat?" he said.