Latest Farmer Vs. Rancher Epic from Texas Centers on Ethanol

Michael Giberson

An article in the Houston Chronicle reports that the high price of corn is putting the squeeze on the cattle feedlot business:

[John] Van Pelt, the manager of a cattle feedlot in this town 50 miles south of Amarillo, is now paying $215 a ton for cattle feed — double what he spent just three years ago. With 20,000 cattle in his yard, that works out to about $25,000 per day, just in feed, and what could become several million dollars in added costs this year.

Van Pelt blames a surge in U.S. ethanol production for a near tripling in the price of corn, the main ingredient in cattle feed, and for cutting into profits across Texas’ massive cattle feeding industry.

… Cattle feeders won a victory last fall when the state Legislature killed a key incentive that had helped attract ethanol and biodiesel plants to Texas, a provision the feeders said gave preferential treatment to biofuels.

But U.S. ethanol production continues to rise amid growing demand for the fuel and as new plants come online, including several in Texas. The situation is likely to keep pressure on corn prices for both ethanol producers and cattle feeders.

The article includes a quote from an ethanol industry representative who makes the reasonable claim that not all of the blame for higher food prices can be placed at the ethanol industry’s feet. Rising demand for food from growing economies around the world have also put upward pressure on food prices.

…The matter has drawn attention from the top of state government.

“Finding that balance is what this is all about,” Gov. Rick Perry said last summer in Houston. “We don’t want to be put in the place of having to decide whether we are going to feed cattle or fuel vehicles.”

Not to mention, of course, the possibility of feeding people. Given that curious omission, I’m sure we can say we don’t want the government “to be put in the place of having to decide” between alternative uses of valuable resources.

ELSEWHERE, Time magazine connects the dots: “An explosion in demand for farm-grown fuels has raised global crop prices to record highs, which is spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon at an increasingly alarming rate.”

4 thoughts on “Latest Farmer Vs. Rancher Epic from Texas Centers on Ethanol

  1. It seems to me that this would be a ripe topic for study by economists.

    Surely someone can do the back of the envelope calculation to determine how much more corn is being used for ethanol, and take a stab as to what that does to price. It doesn’t make sense to me that ethanol is the driver, rather than booming China and India.

    If nothing else, the cattle can be fed the leftover mash from ethanol production.

    Expect to see consumers switch to more corn feed efficient poultry and pork from beef.

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