What diversion? The supply of grains and feed meal has continued to increase
May 9, 2008 - Critics from the livestock industry have charged that biofuels alone are causing their feed costs to rise dramatically. The rising costs to the livestock industry are undeniable, but the critics' argument falls apart when they blame biofuels: how can anyone argue that biofuels are diverting feed from the livestock industry when the supply of corn and soybean meal to the industry has continued to grow right alongside the ethanol boom? If the price of corn and beans is cutting so deeply into the livestock industry's profits, how can U.S. pork production afford to grow by nearly seven percent this year? (USDA
projection)
The fact is that livestock production remains quite profitable-perhaps not as profitable as when the U.S. taxpayers subsidized crop production, essentially allowing feeding operations and everyone else to buy grain at prices below the cost of producing it. Livestock still represents the largest customer of U.S. grain and oilseed production. It uses up more than half of the corn produced in America. One could argue that the half of the $8 billion per year the federal government would spend to support crop farmers when they have to sell corn at $2 and soybeans at $5.50-four billion dollars of taxpayer money each year is a direct transfer to the livestock industry under the economic conditions that livestock industry CEOs prefer.
Here's the supply picture. Looking at the supply of corn and soybeans to the livestock industry for this year, the estimated supply of soybean meal to the U.S. market rose this year by 850,000 metric tons, while the supply of corn (beginning stocks plus production) increased nearly 50 million metric tons-or 1.8 billion bushels.
Of that corn supply increase, the highest estimate is that the expanding ethanol industry will take a billion of those bushels, leaving 800 million bushels more corn than livestock and food processing companies had ready to hand the year before. And then there's the supply of distillers grains - a billion bushels of corn into ethanol will produce about 300 million bushels of high protein distillers grains. This will displace corn from cattle feeding and put it right into the feed bins of swine and poultry.
Trostle notes that in the period 2002-2007, feed use of wheat and coarse grains across the world grew 27 percent. Rather than a zero-sum situation, where biofuels rob from livestock, production and use of grain have grown across the board. [Continued...]
