Ethanol and Livestock: Synergies or
Competition?
Chad Hart
August 28, 2006
2006 Biobased Industry Outlook Conference
Growing the Bioeconomy:
Reimagining Agriculture for National Energy Security
Iowa State University
Ames, Iowa
E-mail: chart@iastate.edu
Ethanol-Livestock Synergies
A 50-Million Gallon Ethanol Plant …
• Uses roughly 18.5 million bushels of corn
– In Iowa, corn from 116,000 acres
• Produces 315 million pounds of distillers
grains
– This could feed approx. 60,000 dairy cattle
• Utilizes natural gas in plant operations
– Manure from 60,000 dairy cattle could produce
enough methane to meet 25 percent of the ethanol
plant’s needs
The 2 Keys to the Food-Fuel Debate
• The ability of U.S. corn production to match
demands from ethanol, livestock, and exports
• The ability of U.S. livestock to utilize ethanol
co-products as a partial substitute for corn in
feed rations
An Exploratory Look at the Food-Fuel Debate
The Corn Market before the Introduction of a new Ethanol Plant
Price
Supply
P
Demand
Q
Quantity
The New Plant Shifts Corn Demand
Price
Supply
Pnew
Pold
Demand
Quantity
Qold
Qnew Qtrans
Projection Scenario
• Look at possible effects from a doubling of
U.S. ethanol production from 2005 to 2009
– Source: FAPRI July 2006 Baseline Update
• Impacts both crop and livestock markets
• Higher corn prices may not make the U.S.
livestock industry less competitive in world
markets
Production
Marketing Year
Farm Price
1
0
/1
10
/1
09
9
8
/0
08
/0
07
7
6
/0
06
/0
05
5
4
/0
04
/0
03
3
2
/0
02
/0
01
1
0
/0
00
/0
99
9
8
/9
98
/9
97
7
6
/9
96
/9
95
Billion Bushels
13
3.50
12
3.20
11
2.90
10
2.60
9
8
2.30
7
2.00
6
1.70
$ per Bushel
Corn Production and Prices
Feed
Ethanol
Exports
Marketing Year
Other
/1
1
10
/1
0
09
/0
9
08
/0
8
07
/0
7
06
/0
6
05
/0
5
04
/0
4
03
/0
3
02
/0
2
01
/0
1
00
/0
0
99
/9
9
98
/9
8
97
/9
7
96
/9
6
95
Percen
Historical Corn Utilization
70
60
50
40
30
20
10
0
Feed
Ethanol
Exports
Marketing Year
Other
1
/1
10
0
9
/1
09
/0
08
8
/0
07
7
6
/0
06
/0
05
5
/0
04
4
/0
03
3
2
/0
02
/0
01
1
/0
00
0
/0
99
9
8
/9
98
/9
97
7
/9
96
6
/9
95
Percen
Projected Corn Utilization
70
60
50
40
30
20
10
0
World Corn Exports in 2005/2006
7%
15%
8%
7%
63%
Argentina
China
EU New Member States
United States
Rest of World
So With a Doubling of Ethanol Production…
• Corn prices rise
• U.S. corn feed and export demand falls on a
percentage basis
• But the U.S. is still the largest exporter of corn
and the U.S. corn price is the benchmark world
corn price
• Livestock producers throughout the world feel
the impact of higher U.S. corn prices
Production (Dry Equivalent)
Marketing Year
Price
1
0
/1
10
/1
09
9
8
/0
08
/0
07
7
6
/0
06
/0
05
5
4
/0
04
/0
03
3
2
/0
02
/0
01
1
0
/0
00
/0
99
9
8
/9
98
/9
97
7
6
/9
96
/9
95
$ per Ton
Million Tons
Distillers Grains
30
160
20
130
10
100
0
70
Pork
Year
Beef
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
Billion Pounds
U.S. Meat Production
29
27
25
23
21
19
17
Some Summary Thoughts
• The doubling of U.S. ethanol production by
2009 is likely a conservative scenario given
the current pace of investment in the industry
– In Iowa, announced expansions and new
construction of ethanol plants will more than
double capacity
• Livestock impacts will depend on the ability of
species to adapt to ethanol co-products
– Cattle have an advantage over hogs and poultry?
Some Summary Thoughts
• Corn production shortfalls will pressure both
the ethanol and livestock industries
– Could squeeze the corn export market and affect
the competitiveness of the U.S. pork and poultry
exports
• Ethanol’s corn demand is linked with energy
prices and government policy; Livestock’s
corn demand is linked with meat prices
– Currently, corn is worth more as ethanol than as
feed
Some Summary Thoughts
• CARD researchers are continuing to explore
the connection among the crop, livestock, and
ethanol markets