I'm disturbed by all the complaining today — particularly by cattlemen — regarding grain-based ethanol. As a consulting nutritionist with 400,000 cattle under my care, and as a dairy owner and cattle feeder myself, I know the reality of high feed costs.
Fact is, the U.S. would raise 10-13 billion bu. of corn whether we were producing ethanol or not. From 1975-2000, we fed corn that was at loan-rate economics. As an industry, corn was cheap and we learned how to feed it.
Unfortunately, the American taxpayer subsidized the corn industry to the tune of $6-$10 billion/year. Now, taxpayers are subsidizing the blenders (a much smaller percentage of the cost) and American corn growers are profiting tremendously.
Today, many in the cattle industry whine about the impact of ethanol and expensive corn. But U.S. cattle feeding has always “followed the byproducts.” Beet pulp, potato waste, etc., are examples of how feedlot production followed the byproducts around the U.S.
Now that the main byproduct is distiller's grain, the cattle will tend to migrate toward the feed supply — not all the cattle, just a percentage.
I'm sure that if I was located outside the ethanol belt, I would fight any shift in industry logistics. But most of the cattle fed in the U.S. are still fed outside the ethanol belt. Thus, the roughly 25% fed within the ethanol belt can't alone “bid up” feeder prices.
Economics show that the industry is paying too much for replacement cattle, not too much for feedstuffs. The industry also needs to realize that we won't transport cattle (or meat) as cheaply or easily as we have in the past. In fact, imagine the costs of transporting cattle and feedstuffs if ethanol wasn't involved in the pricing of gasoline?
In fact, the industry as a whole has rallied around critical mass instead of quality mass for quite some time. Why would we feed cattle for a 2-3% return on investment as we have the past 15 years?
We've also rallied around “bigger is better” in the U.S. feedlot industry for a while now, but that argument is only valid up until we forget the objective of what we're producing.
Previous to the ethanol boon, anyone living in the Midwest watched farm towns shrivel. Most towns had a convenience store and possibly a Wal-Mart. Today, towns with ethanol plants are being revitalized.
As rural communities and cattlemen, we should be proud that we're supplying energy to the world, and that cattle can utilize the byproducts. While I don't believe ethanol is the permanent answer to replacing energy dependency on foreign oil, it's part of the solution. How high would the price of oil go if we didn't have ethanol to fill the supply gap?
By the way, the October issue of National Geographic had an excellent article on carbon reduction and the true yields of various ethanol substrates used for production.
These factors are forcing a paradigm change in the cattle industry that we must learn to deal with. It is national energy policy and looks to be that way for a long time to come.
I am tired of turf-protecting the status quo in the cattle industry. As an industry, we should be furious about the lack of world market share we aren't capturing. With the low value of the U.S. dollar, and the cheapest feedstuffs in the world, we should be providing the world with beef.
Instead, we argue over ethanol production. Producer pitted against producer isn't a good thing for the U.S. beef industry. Isn't it time to recognize that things are changing?