The main headline in this week's edition of Feedstuffs magazine claims/cautions that the EPA has partially approved E15 ethanol blends for 2007 and newer model cars. Why this headline trumped a whole lot of other interesting feed industry news is that the whole ethanol situation has huge implications in animal agriculture if we choose to maintain the status quo.
Although using corn to create motor vehicle fuel is fantastically inefficient, we aren't literally on the verge of taking food out of someones mouth because we choose to use corn to produce ethanol. I think a more accurate assessment is that we are using some of our "cheap" grain supply to feed cars instead of cattle, and BOTH are fantastically inefficient uses of corn.
Given that ethanol production AND feed corn production are heavily subsidized by the federal government, we are currently in a situation where thanks to government intervention the market for corn has been severely and artificially manipulated. Since the acreage dedicated to corn is maxed out and pretty static from year to year, I'd say the price of corn is likely to stay high, at least relative to the long term average, until one or both of these industries lose their federal corn subsidies.
Unlike hogs and chickens, beef cattle aren't designed by nature to eat corn. At the end of the day, beef cattle always make sense in places that can't grow much grain. Unless it is fantastically cheap because it has been massively overproduced (as it has been my entire life), it makes no economic sense to feed corn to beef cattle. To grow a pound of beef requires 6 to 10 lbs of corn at a minimum.
As we move toward an election and a new farm bill, keep your ears and eyes on beef subsidies. I'd wager that somewhere in Washington, lobbyists for the cattle industry are proposing a series of subsidies for beef producers to counteract and overcome the current massive federal subsidies on corn.
Didn't we used to call government manipulation of free markets socialism ?
3 days ago