The booming ethanol industry may help ease
"Everybody is all excited about ethanol, but all it's going to do is raise the price of corn, which hurts dairies, feedlots and anybody else who uses it for feed," said Sacramento County dairy producer Case Van Steyn.
Despite a bumper crop this year, corn is selling for record-high prices that are expected to remain strong in the coming year as more
For the state's dairy producers, the timing couldn't be worse. The rising cost of feed is one more blow in a year already plagued with sagging milk prices, high energy costs and major herd losses from the summer heat wave.
"Right now the dairy business is at its ultimate worst," said
With the 2006-07 corn crop forecast at 10.7 billion bushels, Rich Hoch, president of California Grain and Feed Association, said there's plenty of corn in the market for animal agriculture needs, but the current supply may not be sufficient to cover future demands from ethanol as well as other corn uses such as for production of corn syrup and cereal.
The National Energy Bill passed by Congress in 2005 is also fueling more ethanol production by requiring refiners to increase ethanol usage to 7.5 billion gallons by 2012. About 30 percent of all
As of February 2006, the annual
"The problem is the level of ethanol that's coming online is coming online at such rates that the only way to offset it is to plant more acres of corn," said Hoch, a poultry producer in
Although corn has not been a major crop in
The bulk of the new corn mainly goes into silage for the cows, which need both hay and corn for feed. The price of corn is stronger than cotton, Bagby said, as is top-quality alfalfa hay, which has seen robust prices for several seasons.
Richard Matteis, executive vice president of the California Grain and Feed Association, said he is not aware of any significant increase in the state's corn acreage at this time, but more corn may be planted as the
The Tulare County-based Phoenix Bio-Industries, located in
Officials from both plants initially said they would like to seek long-term contracts with
"If this trend holds, maybe we'll see more acreage go in," said Matteis. "But you always have to remember:
Mark Hansen, a cotton grower in Kings County and chairman of the California Farm Bureau Federation's cotton advisory committee, said some cotton farmers may be switching to corn, particularly if they are near dairy farms, but not too many are growing grain corn for ethanol.
Only corn kernels are used in ethanol production, while silage corn includes the entire plant stalk, which costs considerably more to transport. At this time it is still more economical for ethanol plants to ship grain corn from the
"The price for grain corn is probably not high enough to get very many farmers to grow it," Hansen said. "I think most of all the corn is still going to be imported for the ethanol plants, but there might be some growers growing some for grain corn, but the majority is for silage."
"We are working with our nutritionist," said
Many dairy producers grow a portion of their feed, typically alfalfa or silage. But they buy most of their grain corn from the
Van Exel said he typically grows his own corn for silage, but next year he plans to set some of that corn aside to dry for grain.
"Corn is a major staple of a ration," he said, adding that he has also adjusted his feed ration to use less corn. "I've done a lot of things, but you still have to feed your cows."
For those in the poultry business, corn makes up a major part of the ration — 60 percent to 65 percent, said Hoch, and there's not much he can adjust with that formula.
"We're very dependent upon corn, and we really don't have a lot of good alternatives to replace it, so the net result to us is that I have to pay more to get it, and that makes the cost to produce the egg higher," he said. "What's going to happen is that we as consumers are going to have to pay more. We're going to pay more for the ingredients that we put into our animals that we later consume."
There may be an upside to the burgeoning ethanol market for livestock producers, however. As production of the alternative fuel increases, so will the supply of ethanol byproducts, the most prominent of which is distiller's grains, which can be used in livestock feed.
The high-protein byproduct has so far been primarily used as a feed ingredient in dairy and beef cattle operations but is making its way into feed rations of hogs and poultry. A 56-pound bushel of corn used in ethanol production generates about 17.4 pounds of distiller's grains, according to the USDA.
"It's still not a total replacement for corn," said Van Exel of distiller's grains. "Large, large quantities will be available, but you can only feed so much of that."
Most distiller's grains are produced in the
Michael Marsh, chief executive officer of Western United Dairymen, said
"Farmers have invested significant amounts of money to try to comply with new air regulations on (volatile organic compound) emissions," said Marsh. "If they were to start importing and changing their feed ration, which has been shown to be probably the highest source of VOC emissions on the farm, they may have an additional issue to deal with such as enhanced VOC emissions from the farm."