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Ethanol’s Impact on the Livestock Business

“Ethanol and a Changing Agricultural Landscape” is a new report out from the USDA’s Economic Research Service (ERS). If you raise livestock, you might be interested in reading it. There’s a chapter that addresses biofuels’ impacts on the livestock sector as well as the environment.

Over the short term, feed grain costs will likely rise as biofuel production increases. The authors (Scott A. Malcolm, Marcel Aillery and Marca Weinberg) point out that corn prices are forecast to rise by 2.2 due percent due to the 15-billion corn-based ethanol target for 2015 in the Renewable Fuel Standard (RFS). Soybean prices also are expected to rise by 2.7 percent due to higher demand for soybean oil in biodiesel production.

Livestock feeders who use distillers grains (DDGS) may help offset higher feed grain costs. However, the authors add that increased DDGS demand would result in higher prices for DDGS. Overall, higher feed prices would lead to a slight decrease in livestock numbers.

Longer term, an expansion in the ethanol industry could result in greater concentration of beef and dairy herds near ethanol production plants where there would be ready access to distillers wet grains. “Spreading manure on energy feedstock crops and potential use of animal waste for onsite power generation provide additional incentives for herd expansion near processing facilities,” Malcolm and his colleagues write. They add that ethanol’s reliance on corn as the main feedstock may “adjust to relative regional cost advantages in livestock production, potentially slowing or reversing the recent shift in animal concentrations from the Midwest.”


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