November 17, 2006

 

US ethanol production may cut corn for livestock feed by 33 percent

 

 

Increased use of corn in the ethanol industry would threaten the long term viability of US livestock production by cutting available feed supplies, according to a study from Iowa State University's Center for Agricultural & Rural Development (CARD).

 

The study projects that corn used for livestock feed would fall 33 percent, from 6,032 billion bushels in the baseline to 4,032 billion in their model.

 

This has taken into account more use of distillers dried grains with solubles (DDGS), especially in the beef and dairy sectors, and increased use of wheat, hay and pasture. However, the rest of the reduction in feed use would come from reductions in the size of the US pork and poultry industries

 

The study paints a dire future for the livestock industry.

 

CARD's model increased the corn price from US$1.85 to US$4.05, doubling corn costs per animal from US$27 to US$58 and raised total production costs approximately 31 percent.

 

US pork production would need to fall 10-15 percent to allow the industry to pass the cost increase to the wholesale market, the report noted.

 

The study estimated that corn prices could reach US$4.05 a bushel when the ethanol boom cools down.

 

At this price, corn-based ethanol production would reach 31.5 billion gallons per year, or about 20 percent of the projected US fuel consumption, in 2015.

 

The study said that ethanol use may force the US to become a net corn importer eroding the international competitiveness for pork and poultry.

 

The idea that the US, one of the top corn exporters in the world, may import corn is not as absurd as it seems.  Iowa, the number-one corn state, is now also the number-one ethanol state.

 

This affects the animal industry in the state, who was situated there because of the greater availability of corn.

 

The transition to these lower production levels would be painful for most producers, the report said. However, overall rural economies would be cushioned by ethanol construction despite the reduction of livestock activity, the report noted.