Ethanol production doubled feed costs

High ethanol production doubled feed costs for American livestock producers between 2006 and 2008.

Dairymen and beef producers have long argued that skyrocketing feed costs were largely attributed to increased ethanol production. However, the report by the accountability office is the first government report to support livestock producers' allegations that ethanol was undercutting other agricultural sectors.

Bob Naerebout, executive director of the Idaho Dairymen's Association said the beef industry has assumed that ethanol has negatively impacted feed prices for producers and a false demand for a product will result to negative impacts on other markets.

The rise of ethanol production was supported mostly by rising fuel prices that exceeded US$4 per gallon in 2007 and government subsidies to companies producing renewable fuels.

Officials said in the report that up to 60 percent of corn grown in the United States before 2006 was used in beef, pork, poultry and dairy production. However, by 2008 more than one third of corn in the US was diverted to ethanol production plants scattered across the nation.

The GOA report says "increased use of corn for ethanol has affected livestock producers by increasing prices for feed," and that "in addition, livestock producers face reductions in land available for grazing."

Cropland used for pasture or grazing declined by 41 percent from 2002 to 2007 as more land was used to grown the starchy corn used to make ethanol, according to USDA's 2007 Census of Agriculture.

Faced with multiple factors including rising feed costs, declining availability of land for grazing, and decreased domestic demand for meat, many US livestock producers reduced the size of their herds and flocks in 2008.

The USDA is also forecasting a decline in 2009 and 2010 across all major categories of meat production.