On the heels of USDA's monthly crop report, the Iowa Renewable Fuels Association (IRFA) last week unveiled a list of 10 ways ethanol production is helping livestock farmers during the historic 2012 drought. While the drought is having a profound impact on crop production, thanks to ethanol production there is a larger and more flexible corn supply than was available during previous droughts of this magnitude, says IRFA.
"USDA's August Crop Report confirms what we already knew – that the drought's impact on supply and price will be felt by corn consumers around the world," says IRFA executive director Monte Shaw. "Yet, the ag sector has seen droughts before, and it will survive again. This is a time when all of agriculture should pull together. Unfortunately, national livestock trade associations have chosen to politicize the on-going drought as part of their multiyear effort to return corn prices to $2 per bushel. At times like this, it is important to look past the rhetoric to the facts. And the fact is that ethanol production provides a benefit to Midwestern livestock producers in many ways."
Ten Ways Ethanol Production Helps Livestock Farmers During 2012 Drought
1) Ethanol industry has driven the production of a larger corn crop. Simply put, there is more corn to go around. American farmers responded to the demand for more corn for ethanol processing by planting millions more acres. With no ethanol industry, farmers would have likely planted around 75 million acres of corn this year (just like they did in 2001), instead of 95 million acres. So, factoring in drought reduced yields, without ethanol production the 2012 corn crop would likely be more than 2 billion bushels smaller and there would be NO distillers grains to use as a cost-effective substitute for high-priced corn and soybean meal.
2) Ethanol industry will bear the brunt of any rationing stemming from the drought. Without ethanol, the smaller corn harvest (yield and acres) would have to be rationed solely by livestock producers (domestic or export customers). Ethanol producers have already cut back production by over 10% (several plants have shut down, putting people out of work), and that's likely just the beginning.
3) Due to ethanol demand, corn yields have increased. Seed companies spent much more than they would have otherwise on research and development over the last decade. As a result, farmers have access to seed varieties with greater yields that can withstand the drought much better than in prior years, like 1988.
4) Maintaining the RFS sends a market signal to world farmers (including those in South America who will be planting soon) and U.S. farmers not to reduce corn acres. Conversely, lowering the threshold for waiving the RFS would send a market signal that renewable fuels are not a reliable market and corn acres planted would be reduced – ultimately hurting the livestock groups asking for such a waiver.
5) One-third of every bushel of corn processed into ethanol returns to the livestock feed supply in the form of distillers grains – including all of the protein, fat, fiber and other nutrients. Only the starch portion of the kernel is used to produce ethanol. Last year the amount of distillers grains produced was more than the total amount of grain consumed by all the beef cattle in American feedlots.
6) As the nutritious feed portions of the corn kernel are concentrated, distillers grains are a more efficient source of energy and protein than the ingredients they are replacing in livestock diets. Distillers grains provide approximately 130% to 150% of the energy of an equivalent amount of corn when fed to beef cattle. This allows for use of cheap roughage (cornstalks, soybean straw) to be used in livestock diets.
7) Without distillers grains, the cost of cattle and hog rations in the Midwest would go up as distillers grains and roughage are replaced with expensive corn and soybean meal. Bill Couser, of the Couser Cattle Company near Nevada, Iowa, says: "It's amazing to see what ethanol has done for the cattle industry in the state. It used to take 75 bushels of corn to finish a 1,300 pound steer. Today, with distillers grains, we use only 16 to 30 bushels of corn and that number keeps dropping."
8) The drought has negatively impacted much pasture land. Without ample grass, cows may be unable to nurse their calves for the traditional 200-day period. According to Purdue University research, by incorporating distillers grains at 30% or 60% of the ration and weaning calves after 100 days, cattle feeders can save money on feed costs with no negative impacts on average daily gain, feed intake and marbling score.
9) Distillers grains improve weight gains despite external factors, such as hot, dry weather. Andy Jenson of Jenson Farms in Nebraska stated that since cattle like the taste of distillers, they eat on a steady basis and gain weight more uniformly, despite changes in weather.
10) Distillers grains provide an economic source of energy, amino acids and phosphorus for hog diets. According to University of Minnesota research, distillers grains improves the digestive health of grower-finisher pigs and may increase the size of litters when sows are fed high levels of distillers grains (30% to 50% inclusion rate). Roger Zylstra, of Zylstra Hillside Pork near Kellogg, Iowa, adds 30% distillers grains to his hog rations and notes that animal performance is the same while costs are reduced.
Ethanol has helped return corn prices to levels set by market forces, not government programs
For 22 out of the 25 years prior to enactment of the RFS, large livestock producers were able to purchase corn for a price below the cost of production, says Shaw. This was "sustainable" only because of multi-billion dollar crop support programs in the farm bill. This situation gave a competitive advantage to livestock producers (like those in Texas, North Carolina and Arkansas that control the national livestock groups) who purchase all their corn. Since 2006, the market economics have reversed, thereby benefiting the farmer-feeder over the large livestock producers. When you also factor in the cost advantages of ethanol's feed coproduct (distillers grains) it is clear that ethanol production is not "bad" for livestock producers, although ethanol production has played a role in returning corn prices to levels sustainable by market forces, not price support programs.
Iowa is the leader in renewable fuels production. Iowa has 13 biodiesel facilities with the capacity to produce 320 million gallons annually. In addition, Iowa has 41 ethanol refineries capable of producing nearly 3.7 billion gallons annually and one new facility under construction. The Iowa Renewable Fuels Association was formed in 2002 to represent the state's liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development. For more information, visit the IRFA website www.IowaRFA.org.