‘We’ve got to have more corn,’ expert says

New vehicles seen as pushing demand for ethanol even higher.
Sunday, March 4, 2007 | 12:00 a.m. CST; updated 4:36 a.m. CDT, Tuesday, July 22, 2008

With the expanded use of ethanol, cars and sows are now competing for the same corn crop. The increased demand is profitable for Missouri corn farmers, but other sectors of the economy are feeling the burden of higher prices.

“We’ve got to have more corn,” said Peter Zimmel of the MU Department of Agricultural Economics.

Livestock remains the single largest consumer of corn in Missouri, eating 70 to 75 percent of the total production. Ethanol production, which dates to the mid-1990s in Missouri, now consumes more than 14 percent of the state’s corn crop.

When Missouri’s four proposed ethanol plants begin production and after the expansion of Mid-Missouri Energy, Missouri will produce an estimated 431 million gallons of ethanol. At that rate, ethanol production would require more than 45 percent of what the state’s farmers harvested in 2006.

Missouri Ethanol, a midsized plant in Audrain County, consumes as much corn as 1.3 million hogs can eat in a year.

In response to the shifting demand, corn prices have risen to $4 a bushel from last fall’s harvest price of around $2.40.

“That’s a drastic change, and we’ve never seen anything like it,” said Bill Kessler, who raises hogs, cattle, corn and soybeans northeast of Auxvasse.

The higher prices have increased the cost of getting meat from the farm to the fork.

Ron Plain, professor of agricultural economics at MU, said ethanol-related corn demand and inflation are expected to drive up the price of meat, dairy products and eggs by about 12 percent in 2009. Consumer prices will increase even more for higher-end cuts of meat, such as T-bones and tenderloins, he said.

Americans eat an average of 237 pounds of meat a year, and Plain said he expects that number to decline three to four pounds by 2009.

“I think (consumers) will take the higher prices fairly well,” Plain said. “I’m not sure that there’s any price people are more conscious of than gas. My take is, Americans are willing to pay more for food if it is helping on the gas front. And I think it is.”

The increased costs in meat production, driven by higher corn prices, present a challenge for meat producers, who already walk a fine line between profit and loss.

Once the increased cost of production is absorbed into the system, Plain estimates a hog farmer will need to earn about $68 per 100 pounds of hog carcass to break even. On Valentine’s Day, the Chicago Mercantile Exchange was selling lean hog futures in February 2008 for $68.25.

As the cost of feeding a calf to harvest weight increases, the value of the calf is going down, said John Kleiboeker, executive director of Missouri Beef Industry Council.

The increased cost of corn will be an adjustment for Missouri farmers, who maintain about 4.45 million cows and calves, Plain said, citing statistics from the USDA.

Missouri has the second-largest herd in the nation, Kleiboeker said. But he said that many people who raise cattle grow corn as well, “so that they get money back on the other side.”

Kessler grows enough grain on his farm to feed his animals, but his 500 sows produce about 10,000 offspring a year and nearly 75 percent of those piglets are sold to other farms as 3 week olds. He said the cost of raising piglets has gone up $6 per animal as of the fall of 2006, and he worries that the farmers who buy his piglets may decide they can’t afford to buy anymore.

What scares Kessler even more is the possibility of a weather-related corn shortage, such as those caused by drought, combined with ethanol producers needing more and more corn. He has a stake in biofuels as a member of biodiesel and ethanol cooperatives.

Mandates for greater ethanol use in Missouri and California will underpin the current market, Kessler said.

And Plain said that if flex-fuel vehicles capable of using the higher E-85 ethanol blend become more common, the ethanol market will continue to expand.

Missouri’s four operating ethanol plants produce about 161 million gallons of ethanol per year, a process that requires about 58 million bushels of corn. For perspective, that represents about three times the average annual corn crop produced in Boone and the seven surrounding counties for the last 10 years.

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