July 4, 2007

 

US beef sector faces tough battle against ethanol

 

 

Beef farmers in the US admit they are facing a rough fight on the ethanol boom as cheap corn to feed cattle may soon be over as expected.

 

Bill Holbrook, from the Pro-Exporter Network in the US, said the outlook for cattle producers was not bright in regards to the industry's staple feedlot ration of corn.

 

He said ethanol prices of $US2.10 to US$2.15 ($A2.46-$2.52) a gallon (4.4 litres), these ethanol plants can still make money if corn is at $US5 a bushel ($A240 a tonne).

 

Holbrook's company recently completed a 10-year forecast into the possible implications of ethanol on the US grain and livestock industries.

 

Ethanol and corn prices have become a big issue in the US in recent years, with cattle feeders already starting to feel the hurt of higher feed costs.

 

US cattle finishers such as Gary Rupiper said that they were losing about $US100 ($A117) per head on corn-fed animals due to sluggish beef market and higher feed prices over ethanol.

 

The latest US feedlot report shows a drop in the number of cattle being put on to feed, which authorities said was a reaction to higher feed costs.

 

The number of cattle entering US feedlots during May was 2.2 million -- 5 percent lower than the five-year average.

 

Beef producer Brad Foote, whose family runs a 32,000-head feedlot in Nebraska, said ethanol could ultimately force a re-valuation of young feeder steers and heifers in the US as prices will have to come down as feeders can only pay so much.

 

Ethanol could also become an issue for Australian farmers as it is also connected to the US being one of the largest export markets for beef, he said.

 

Holbrook said the US had the capacity to produce six billion gallons of ethanol (26.4 billion litres), which is then blended with oil-based petroleum to cheapen its price. This alternative fuel is set to double production with new ethanol plants capable of producing another six billion gallons already under construction.

 

The Kansas City Board of Trade, says it takes one bushel (25kg) of corn to produce 2.8 gallons (12.3 litres) of ethanol.

 

It means that a good portion of the US corn crop this year, estimated at 250 million tonnes, could be gobbled by the ethanol trade.

 

However, Holbrook said advances in plant genetics could help ease the situation as it could increase corn yields.

 

Corn acreage predictions in today's average of 9.5 tonnes per hectares can be 10 tonnes per hectares. This would push the US corn crop, in a normal season, to 350 million tonnes within the next 10 years.

 

Holbrook added the US has ability to grow more corn on the same acreage of land.

 

But he said the US agricultural industry would also face other challenges, including changes to grain distribution and transport and likely to impact location feedlots as ethanol plants can distillers' grain -- an alternative feed -- become more accessible.

 

The latest report on the US cattle feedlot industry said there was already a noticeable change in feedlot location due to ethanol.

 

It said that while the overall number of cattle put on to feed during May in the US had been low, certain states such as Iowa, South Dakota and Nebraska -- large corn-growing areas with multiple ethanol plants -- had increased their numbers by up to 11 percent.

 

There are concerns in the US that this change to feeding patterns could affect the marketing of cattle due to feedlots becoming concentrated in the grain belts.