A new report from the Center for Agricultural and Rural Development at IowaStateUniversity predicts that continued high feed costs fueled by ethanol expansion will reduce livestock production, further drive up food prices and decrease U.S. exports of crops and meat.

The study, “Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets,” was shared on Capitol Hill last week.

“What we’ve learned from this study is that there are serious consequences associated with an increased ethanol-usage mandate,” says Gregg Doud, chief economist for the National Cattlemen’s Beef Association.  “After policymakers read this study, our question to them is:  How do you plan to address the loss in cow-calf producers' income if we increase the feed grains-based fuel mandate and we don't produce a record corn crop?”

According to the report, all livestock sectors would face similar scenarios from the prolonged high cost of feed.

The executive summary of the report says “Under current federal ethanol policy and current projections of crude oil prices, U.S. ethanol production from corn is projected to climb to 14.8 billion gallons by 2011.

“To supply this expanded ethanol production, corn acreage is projected to increase to almost 94 million acres. To induce farmers to plant this much corn, season-average corn prices are projected to reach approximately $3.40 per bushel. Most of this increased corn acreage replaces U.S. soybean acres, which are projected to decline to 69 million acres. Soybean prices are projected to average above $7.00 per bushel.

“In response to permanently higher feed prices, livestock producers are assumed to eventually reduce production to allow their higher production costs to be passed onto consumers. Thus, livestock production is projected to enter a period of slower growth as these adjustments take place. Although U.S. exports of corn, soybeans, wheat, cotton, and meat products are projected to decline or flatten, the competitiveness of U.S. agriculture is largely unchanged because most of the rest of the world’s producers also face sharply higher feed costs.”

The study was funded in part by NCBA, the American Meat Institute, Grocery Manufacturers/Food Products Association, National Chicken Council, National Grain and Feed Association, National Oilseed Processors Association, National Pork Producers Council, National Turkey Federation and North American Millers Association. 

To view the full report, go to:  http://www.card.iastate.edu/publications/synopsis.aspx?id=1050

NCBA, Meatingplace.com, IowaStateUniversity