Ethanol’s effect on corn prices

In Georgia there are people that grow corn.  We don’t.  But we depend on corn to feed our cattle and chickens.  So begins the conversation on one of the latest agricultural debates.  While we are friends with our local corn growers, we are not happy with the effects of the rising corn prices.  Of course, these neighbors are tickled about $6 corn prices and appreciate the work that the National Corn Growers Association has done to lobby for the subsidizing of corn ethanol by the US government.  The Energy Policy Act of 2005 required use of 7.5×10^9 US gal (28×10^6 m3) of renewable fuel by 2012, and the Energy Independence and Security Act of 2007 raised the standard, to 36×10^9 US gal (140×10^6 m3) of annual renewable fuel use by 2022.  Since that time corn prices have gone from around $2/bushel to over $6/bu in 2011.

*By 2010, the U.S. ethanol industry was consuming 41% of the nation’s corn — 15% of the world’s supply. To many, even former supporters of corn-ethanol production, this level of consumption was just intuitively wrong. In November 2010, former Vice President Al Gore issued a public apology for his own years of support of this industry: “First-generation ethanol, I think, was a mistake,” Gore said. He admitted that one of his reasons for supporting early ethanol efforts was political ambition: “I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.”—Daily Finance

According to the Environmental Law Institute, through a seven-year study period beginning in 2002, corn ethanol received total federal subsidies of $16.8 billion.  And that doesn’t include separate state-level subsidies.

The price of corn began to rise in the fall of 2006, and since then, the broiler chicken industry alone has had to spend an extra $22.5 billion in higher feed costs.

Cattle producers have the ability to use alternative feeds, like distillers’ dry grains (DDGs), one of several byproducts of grain-based ethanol and sweetener production that can be fed to livestock.  On our farm we use the overrun from a corn tortilla factory to feed mix in our feed rations.  We have a vertical mixer that mixes hay, an energy source (like corn tortillas), a protein source (I think my husband is currently using corn gluten) and a mineral supplement.  Cattle can also be supplemented with hay and pasture.  Poultry production is much more at the mercy of the price of corn.  Chickens only have one stomach and so are not nearly as efficient as cattle in the use of by-product feeds. 

We love our corn-growing friends and we are happy for them on their high corn prices.  However, there is an imbalance in the system as of today.  Part of the beauty of being a farmer is that we know there are things out of our control and if we sit back, letting the storm roll over, we will see a new sunrise tomorrow and know that we can and will forge ever onward.  Agriculture works in cycles and while we are struggling through the troughs, we can pray for the next peak.  When it arrives we will be grateful and enjoy the good moments while hedging for the next downturn.  Corn growers and proponents are not bad, they are simply enjoying a high point.  However, government subsidy programs were put in place to protect farmers in low times; they should look closer at the ethanol subsidies and realize that their interference in that market is harmful to others—like poultry producers.