Feed or fuel: High corn prices lead to increase in feed cost for farmers

Clark County

Discussion

February 2, 2008

By Melissa Moody The News and Tribune Sat Feb 02, 2008, 01:37 AM EST

John Adams has been raising hogs on his Sellersburg farm since 1945, first with his father and now with his oldest son. With more than 1,000 hogs, Adams has a lot of mouths to feed.

Since the 2007 Energy Bill included a mandate requiring an additional 15 billion gallons of ethanol to be produced primarily from corn, the cost for Adams to feed his livestock has gotten even more expensive. The price of livestock feed increased more than 25 percent from last year.

“We’re losing money all the time,” Adams said. “But we have to feed them.”

Adams also grows corn, soybeans and hay. He can feed the hogs with the corn he grows, but the soybeans have to be sold and then bought back as soybean meal.

“If we had to buy all our (feed) corn, we’d really be in trouble,” he said.

For pork producers in Clark County, and the rest of the state, the increasing price of corn for feed and the decreasing price for pork is leaving them with little profit. Pork producers are hit the hardest by the rising price of corn, but other livestock farmers are affected as well.

Increases in the cost of corn following the latest ethanol mandate is more adverse for Indiana than other states, said Dr. Wally Tyner, an agricultural economist at Purdue University. On average, half of Indiana’s agricultural income comes from livestock.

“Indiana has a high concentration of pork, we’re the largest producer of ducks, and poultry farmers are hit hard, too,” Tyner said. For poultry production, 85 percent of the cost is from feed.

Tom King raises cattle on the Charlestown farm he took over from his father 30 years ago. He said the cost of corn hasn’t been a big problem for him because his herd eats mainly hay with only a little corn thrown in during cold weather.

“We feed a little corn, but not enough that it’s been an economic factor for me,” he said. Though among farmers he knows that to raise calves and those raising other types of livestock, feed costs have been an issue.

Nationally, one-third of corn grown this year will be used for ethanol production, compared with 10 percent in 2005.

“All the mandate says is ‘you have to buy this stuff,’” Tyner said. “It’s pretty clear without the mandate, the price would fall if companies weren’t required to buy it.”

The ethanol mandate basically guarantees a market for ethanol and that oil companies have to acquire 15 billion gallons of it from corn, he said. The latest mandate requires 36 billion gallons of renewable fuels by 2022, while the previous mandate required 7.5 billion gallons by 2012.

The Illinois Pork Producers Association and the Illinois Corn Marketing Board are working to save livestock farmers money and create a use for ethanol by-products. In January, the two groups pledged $1 million to fund research investigating ways to decrease feed costs by using dried distiller’s grains leftover after ethanol production. The ethanol by-product is currently too nutrient-deficient to feed hogs.

“The ethanol has affected livestock farmers,” said Robert Schickel, Indiana Farm Bureau district 10 director. “But with the price of gas, the good outweighs the bad.”

For Adams, the cost to farm his land has become a waiting game. When, and if, the price of pork becomes competitive again, the high cost of feed for his farm will be offset. There is more supply than demand in the pork market currently, and it looks like it will remain that way for another year.

“We’ve been here our whole life,” he said. “We’re just going to have to weather it.”