Ethanol predicted to consume more corn than livestock

Government mandates for biofuel production, as well as ethanol tax subsidies, have in part supported the demand for corn, according to a USDA report from June 2011.

Oil prices have also pushed ethanol demand. As oil prices rise, Meyer said, gasoline manufacturers use more ethanol in their blends since it becomes cheaper relative to oil. Even when oil prices drop, government mandates ensure a minimum level of ethanol consumption.

Exports of corn also affect overall demand for the commodity. According to the USDA, developing economies such as China and India are helping to accelerate worldwide food consumption. As global incomes rise, consumers in other countries eat more meat, which is produced partly using U.S. corn exports as feed.

 

Parcell describes it as a perfect storm, this combination of ethanol-boosting government policies, jumps in oil prices starting in 2007 and a world economy that wants more meat. All these factors contribute to the exploding global demand for corn, which has significantly increased in price.

Higher corn prices provide incentives for farmers to grow more corn. They have also forced the livestock industry to reconsider its options. Livestock producers are looking for lower-cost alternatives, such as distiller grains created during the production of ethanol.

Gary Marshall, CEO of the Missouri Corn Growers Association, believes the USDA should include distiller grains in its total estimates for feed corn since the grains can be fed to livestock.

“We don’t think that we are going to use more corn for ethanol than for cattle feed or hog feed,” Marshall said. The Missouri Corn Growers Association has an ongoing dispute with the USDA over how it does its accounting, he said.

Even with these alternative feeds available, livestock numbers in the US have decreased. Part of this has occurred because farmers have bred larger animals to produce more meat, but Parcell said some is also due to the high prices for corn, which ethanol has helped drive up.

Parcell said the burgeoning ethanol industry and the higher corn prices that have accompanied it have been "a big boon” for rural America. However, he does not think that the number of jobs created by ethanol production has replaced the jobs lost in the livestock industries.