March 23, 2007

Flourishing biofuels industry pushing changes in US livestock
 

The thriving status of the biofuels industry is driving many changes in animal agriculture and more are still to come, according to an Iowa State University agricultural economist.

John Lawrence from the Iowa Beef Centre said though corn will still be abundant, the flourishing ethanol industry will consume a large bulk of the crop from 5.5 million to 10 million bushels.

Lawrence noted that agriculture has become a fuel producer, with the ethanol industry growing faster than economists can make graphs. The growing demand for corn for ethanol production is driving the price of corn up significantly.

Corn prices are now more closely linked to crude oil prices, he said. If world oil prices are at US$60 per barrel, ethanol plants are expected to expand until corn is around US$4 per bushel for corn.

Recent increases in ethanol production would also mean that there is more dried distillers grain (DDGS) available for livestock feed, the economist said.

Lawrence estimated that there will be about 46.8 million tonnes of DDGS produced if the industry processes 5.5 billion bushels for ethanol. Although DDGS may reduce feed costs for pork producers, the price will not be low enough to offset the higher corn price.

A better DDGS is expected due to new production technologies, Lawrence said, but producers should be more aware of the origin of DDGS.

The long-term implication for animal agriculture depends on many factors, including the amount of DDGS in the ration, Lawrence said. The price of DDGS relative to corn and soybean meal prices also is a factor.

In addition, DDGS is transportable but on the case of wet distillers' grain will only be for the local market as it can't be shipped or stored for long, he said.

Pork producers in the long term should expect more corn basis volatility, said Lawrence, and producers should start building better storages to ensure the grain's physical strain to have feed availability the year round.