Ethanol boom strains livestock farmers

E-mail this story

Print this story

Share

While corn growers may be in high cotton these days, all the excitement over ethanol in the last year has cast a cloud over the livestock industry.

High prices have equaled headaches for beef and pork producers, who operate on margins as razor thin as anyone else who makes a living on the farm.

"In general the impacts are pretty much what you would guess," said Darrel Good, a University of Illinois agriculture economist. "It has squeezed some producers."

Good does not predict corn prices will lead to significantly higher prices for beef and pork at the grocery stores, but he did say it is a situation where a lot of cattleman have just had to absorb costs.

"Our input costs for feed just about doubled last year over what it was the year before," said Cimeron Frost, director of industry programs for the Illinois Beef Association.

After decades of corn selling at $2 per bushel, livestock producers have suddenly had to wrestle with corn that sold well over $4 in the last year. It is a situation that creates quite a paradox for smaller beef and hog producers that also grow corn and soybeans.

Randy Faber, a Lee County cattleman, worries the ethanol boom will steer producers away from the cattle industry in favor of relatively easier money in the grain market.

"Some guys might look at it as an opportunity to get out of cattle. Why do chores all winter when you can make your money on corn?"

Faber said.

High prices for grain does not just mean more expensive feed though. Faber said he was able to balance the cost of feeding his 110 cows on the farm with the profit he made raising 600 acres of corn last season.

The cost of feed is also diverted a little bit by an ethanol byproduct called gluten, which can be used to fulfill about 30 to 40 percent of a cow's diet. The gluten is a cheaper feed alternative to actual grain.

"For me personally, the corn prices being a little bit up is better,"

Faber said.

That is not true, however, for cattleman across the country who do not have the same access to the cheaper gluten that Illinois and Iowa farmers do.

"With the byproduct being available in Illinois, we do have the potential to make money in Illinois," said Faber.

According to Frost, it is difficult for some to straddle the fence on ethanol production which is good for one end of their operation and bad for the other.

The current boom which has swung corn prices higher comes at the end of a 25-year period that has seen Illinois cattle shrink from 600,000 head to 400,000. Indirectly, ethanol could play a factor in herds shrinking even more.

Frost says more and more farmers are opting to raise corn on former pasture lands.

"If ethanol keeps driving up the price of corn, it will become an impact on the number of cattle fed in the state," said Frost.

The situation is bleaker for hog farmers in Illinois, who can not take advantage of the affordable gluten for feed. Buying higher priced corn has lead to a bit of a crunch for hog producers in the area.

"Our costs have certainly been raised considerably to the tune of $8 to $10 per hundredweight (or 100 pounds)," said Mark Von Holten, a Lyndon hog farmer. "We have gone from a pretty profitable climate for a couple years to things getting a little bit tougher.

Since no one knows just how high corn prices can ride on ethanol, or how long it will take for the market to swing back the other way, Von Holten predicts things may be bumpy for a while.

With prices starting out relatively high this year, 2007 may be even more difficult for hog farmers than last year was.

"Last year was a pretty good year. Corn prices didn't escalate until the end of the year," said Von Holten, who expects he will just have to ride out the lean times like farmers have done for generations.

"The market takes care of itself, eventually prices will level off to areas that are more sustainable," Von Holten said.