The following answer was provided by Alvaro Garcia, professor and extension dairy specialist at South Dakota State University.
Q: What impact is ethanol having on corn prices and, ultimately, the dairy industry?
A: The recent history of U.S. ethanol for fuel can be divided in two periods: the last decade of the 20th century and the first decade of the current century.
During these two decades, ethanol production grew by 60 and 780 percent, respectively. Estimated production in 2011 was 13,900 million gallons of ethanol. According to the Renewable Fuels Association (2012), U.S. farmers harvested in 2011 almost 12.4 billion bushels of corn. In the same publication, the demand for ethanol production was estimated at 40 percent of the crop or roughly five billion bushels.
During a recent news conference held by the RFA, however, it was suggested that this 40 percent does not take into account the distillers grains co-product, which goes back into the marketplace as animal feed, and that ethanol only utilizes 14.5 million acres of the total 88.2 million acres of corn planted, ending up with 16 percent net corn acres used up by ethanol. During the last decade, corn prices have increased by nearly three-fold. Other factors that influenced corn prices were energy prices, exchange rates, and adverse weather.
Dairy cow rations in the U.S.
In the U.S., diets for dairy cows in confinement consist largely of forage and concentrates. Before the recent expansion of the corn-to-ethanol industry, diets were formulated to contain approximately 50:50 forage-to-concentrate ratio on a dry basis. Alfalfa and corn silage have been the forages of choice, mainly because of their adaptability to the U.S. climate and their potential to sustain higher milk production. Alfalfa (ensiled or hay) has ranged from 35 to 74 percent of the diet dry matter, whereas corn silage from 43 to 60 percent (Mowrey and Spain. 1999). More than half of the cows in the Midwest are fed these two forages at variable concentrations in the diet.
Corn has been by far the most popular grain (93 percent of the cows) because of its high energy density and yield. Corn grain, because of its high starch content, allows formulation of energy-dense rations required by high-producing cows. Although the low protein content in corn could be considered a disadvantage, it turns out to work in favor of the nutritionist. Corn protein is deficient in the amino acid lysine and as a result, there is a need for high-quality forages (e.g. alfalfa) and co-products to supply additional lysine in the diet. If low-protein corn did not dilute the higher protein in alfalfa and other byproducts; the excess protein fed would be excreted as nitrogen, severely “taxing” the environment. Corn inclusion in lactating dairy cow rations has ranged from 35 to 45 percent of the diet dry matter (Mowrey and Spain. 1999).